China’s shares fall as Asian markets slide

China’s shares fall as Asian markets slide
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First Published: Wed, Aug 01 2007. 02 23 PM IST
Updated: Wed, Aug 01 2007. 02 23 PM IST
AP
Shanghai: China’s shares fell Wednesday, 1 August, retreating from record-high levels as Asian markets tumbled following new declines on Wall Street.
The benchmark Shanghai Composite Index ended down 3.8% at 4,300.56 after setting new record highs on Monday and Tuesday. The Shenzhen Composite Index for China’s smaller second market also fell 3.8%, ending at 1,241.95.
“Chinese investors have been more sensitive to the overseas markets, so when they saw the Hang Seng Index (in Hong Kong) fall sharply, most of them chose to track the selloff,” said Mo Fan, an analyst at Soochow Asset Management. The Hang Seng ended the day down 3.1%.
Chinese markets have surged in recent weeks on expectations of strong corporate profits amid sizzling economic growth.
Despite Wednesday’s decline, the Shanghai index is still up more than 60% since the start of the year.
China keeps its markets isolated from global financial flows but shareholders sometimes react to events abroad, especially in key Chinese trading partners such as the United States.
“I expect the stock market to stabilize tomorrow after the tumble,” Mo said. “But in the short-term, there is unlikely to be another significant rise in the benchmark Shanghai index as investors need time to restore confidence.”
Metals firms were among the biggest decliners Wednesday after China’s top economic planning agency said it would curb investment in the nonferrous metals smelting industry.
Chengde Xinxin Vanadium & Titanium dropped 7.8%, while Shandong Nanshan Aluminum declined 5.6% and Yunnan Copper ended down 3.9%.
Liu Yisong, an analyst at Galaxy Securities, attributed the correction to profit-taking in the market.
“Many listed companies have gone ahead of their fair values, especially banks and property developers, as investors have overly bought them on upbeat expectations for corporate earnings recently.”
But both analysts said they don’t expect the correction to reverse the long-term bull run in the market on ample liquidity and China’s booming economy.
Industrial and Commercial Bank of China, the country’s biggest commercial lender, fell 3.7% after rising 15% in the past month. China Merchants Bank fell 2.2% after gaining 22% over the same period.
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First Published: Wed, Aug 01 2007. 02 23 PM IST