Shanghai Index plunges 4.85% amid neighboring losses

By Ding Qi (
Updated: 2007-11-08 16:44

Domestic stocks dove Thursday along with its neighboring markets, as the benchmark Shanghai index fell 271 points, the biggest one-day drop in four months.

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The benchmark Shanghai Composite Index failed to continue Wednesday's rebound and opened at 5,559.15, 43 points lower than yesterday's close. Spurred by huge panic selling, it dove straight down and shed more than 100 points in the last trading hour. The index ended at 5,330.02 points, 271 points, or 4.85 percent lower than Wednesday.

Transaction volume of the market shrank to 83.76 billion yuan (US$11.28 billion) as many individual investors lost hopes for the index for the rest of the year.

The Shenzhen Component Index also plunged 4.21 percent to close at 17,465.46 points, with a turnover of 43.08 billion yuan.

Of all the stocks, only 266 closed up or flat, as number of losers surged to 1,234. The once-popular big cap blue-chips failed to be correction-resistant. Statistics show the top 20 heavy-weight stocks of both markets fell without exception. ICBC lost 3.39 percent and closed at 8.26 yuan per share. Baoshan Iron & Steel fell 7.13 percent to 15.37 yuan. Vanke, the nation's leading property developer, followed suit with a 4.3-percent dive.

Led by declining PetroChina, the oil sector suffered even greater losses although the NYMEX oil futures moved near US$100 a barrel. PetroChina retreated 5.54 percent to 38.19 yuan per share, shrinking more than 20 percent from its landmark debut in Shanghai four days ago. Analysts believe its extra high open on Monday later led to the dive.

In a related move, the Dow Jones Industrial Average fell 2.64 percent on Wednesday to 13,300.02, echoing a basket of worries including the swooning dollar, surging oil prices, and a record loss from General Motors Corp.

The slump on the Wall Street further dampened the Asian market Thursday, as Japan's benchmark Nikkei 225 index fell 2.02 percent to 15,771 points. The benchmark Hang Seng index in Hong Kong also fell 948.71 points amid renewed concern about the impact of the American subprime loan crunch. All these have negatively impacted the domestic market today.

Yet China's sizzling economic figures and the corresponding tightening measures may be a substantial reason for the slump. A report from investment bank Goldman Sachs earlier this week raised the group's forecast for the year's CPI growth to 4.8 percent from 4.5, saying the nation may take more time to ease the pressure off a heated economy and price inflation. It also expects two interest rate hikes before the end of the year.

In addition, some investors are worried that surging global oil prices may push production costs higher in the coming months.

Yet a sober mind and long-term confidence in the nation's economy and the equity market are really important at this panicky moment, securities analysts cautioned, saying the domestic stock market has to embrace more opportunities and challenges in a globalized world.

(For more biz stories, please visit Industry Updates)