China stocks plunge despite easing move

GMT 13:07 2015 Monday ,29 June

Arab Today, arab today China stocks plunge despite easing move

China stocks
Beijing - XINHUA

China's stock market saw sharp fluctuations on Monday despite unexpected rate cuts from the central bank rolled out on Saturday.

The major Shanghai Composite index closed 3.34 percent lower at 4053.03 points. The Shenzhen Component Index lost 5.78 percent to close at 13,566.27 points.

The ChiNext Index, tracking China's Nasdaq-style board of growth enterprises, slumped by 7.91 percent to end at 2,689.76 points.

The People's Bank of China (PBOC) announced on Saturday it would cut both the requirement reserve ratio (RRR), the amount of reserves banks are required to hold, and key interest rates in order to support the real economy and promote restructuring.

However, the stock market seemed to show no signs of relief, with the major index experiencing a roller coaster 10.07 percent volatility during the day.

The Shanghai index opened higher, hitting 4297.48 points at its peak, but soon fell into the negative territory and nosedived more than 7 percent to 3,875.05 points at its bottom.

During Monday's trading, losers outnumbered winners by 829 to 110 in Shanghai, and 1312 to 88 in Shenzhen. More than 1,500 stocks fell by the daily limit of 10 percent.

Stocks relating to transport equipment, medical care, information security, e-commerce, smart home appliances and smart power grids led the losses. Shares on Internet finance, domestic software and environmental protection also tumbled by more than 8 percent.

The Shanghai index lost 21.73 percent over the course of just two weeks. The index hit its peak of 5178.19 points during trading on June 12.

Analysts from Tianxin Investment partially attributed the recent continuous fall to a strict ban on illicit loans for stock purchases and margin trading outside the brokerage system passed by market regulator China Securities Regulatory Commission (CSRC).

Also, banks need to settle their account balance and complete payment to each other in the middle of the year, which resulted in a shortage of funds and hence the fall of the major index, according to the analysts.

Meanwhile, the central bank conducted no market operations throughout June, hence injected no liquidity into the market, which impacted the stock market.

Analysts expect the stock market to continue its rise in the coming months, saying the weekend's easing beat market expectations and will buoy market sentiment. However, the market still needs time to recover and rebound, analysts said, adding that stocks related to policy-supporting sectors are worth investing in.

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