Shenzhen composite tumbles; China's small caps slide

Updated: 2010-06-29 15:21
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China's small-company stocks plunged today, led by health-care and technology companies, on concern they are overvalued given the prospects for slower economic growth.

The CSI Smallcap 500 Index, which trades at 40 times reported earnings, slid 4.9 percent to 3,768.99 at 2 pm. The Shenzhen Composite Index dropped 4.5 percent to 967.81. The Shanghai Composite Index, which trades at 18 times reported earnings, slid 3.3 percent.

"The major problem with small-cap stocks is their high valuations," said Zheng Tuo, president of Shanghai Good Hope Equity Investment Management Co. "There's no way they can hold such a high valuation amid the economic slowdown."

The Conference Board corrected its April gauge for the outlook of China's economy, saying its leading index for the country rose the least since November, rather than registering the biggest gain in 14 months.