Banks hit as Wall Street jitters lead Shanghai index down 0.7%
Shanghai’s key stock index fell yesterday in the wake of a tumble on Wall Street as jittery investors showed their concern over the deepening financial crisis.
The Shanghai Composite Index dropped 0.72 percent, or 14.37 points, to 1,969.39, after reaching an intraday low of 1,893.15. Losers outnumbered gainers 640 to 208 while 18 remained unchanged. Turnover in the local market shrank slightly to 80 billion yuan (US$11.7 billion), compared with 86 billion yuan on Thursday.
“Worsening overseas conditions have put growing pressure on the domestic market, which shows no clear sign of picking up, in spite of the government’s stimulus package,” Golden Sun Securities Co wrote in a research note. “It is hard to turn around the downward trend unless a stronger policy is introduced, such as a buffer fund.”
A buffer fund is a pool of cash used by the government to buy shares in order to prop up the market.
The benchmark index tumbled more than 4 percent and breached the 1,900 barrier at the morning session close on fears that recessions in major foreign economies could hamper China’s economic growth and corporate earnings.
Financial sectors led the losses. Shanghai Pudong Development Bank, the Chinese partner of Citigroup Inc, fell 3.86 percent to 14.19 yuan. China Merchants Bank fell 0.97 percent to 13.21 yuan.
Haitong Securities Co plunged the 10-percent daily cap to 11.98 yuan after about 1.29 billion locked-up shares became tradable yesterday.
However, real estate developers rose on speculation that the central bank will announce a sharp interest rate cut over the weekend.
Poly Real Estate Group, China’s second-largest developer by market value, jumped 6.46 percent to close at 17.97 yuan. Shanghai-based Shimao Property Co added 4.15 percent to 6.28 yuan.
Rumors circulated that the central bank was preparing to cut the interest rate by 54 basis points and lower reserve requirements by 1 percentage point. In addition, a buffer fund of more than 300 billion yuan is expected to be established.
Tags: central-bank, Citigroup, Shanghai-Composite-Index