China's main stock indices plummeted Wednesday as a top legislator warned of
a stock market bubble and irrational investments.
The Shanghai Composite Index lost 144.23 points, or 4.92 per cent to close at 2,786.33.
The Shenzhen Component index fell 629.40 points, or 7.62 per cent, to finish at
7,632.93, the biggest loss since 1997.
China's stock market is developing into a bubble and people run the risk of
making irrational investments, Cheng Siwei, vice-chairman of the standing
committee of the National People's Congress told the Financial Times in an
interview published on the FT's Web site late Tuesday.
Cheng Siwei, vice-chairman of the
standing committee of the National People's Congress, speaks at a forum in
this file photo. China's main stock indices plummeted Wednesday as Cheng
warned of a stock market bubble and irrational investments.
"There is a bubble growing. Investors should be concerned about the risks,"
Cheng is reported as saying. "But in a bull market, people will invest
relatively irrationally. Every investor thinks they can win. But many will end
up losing. But that is their risk and their choice."
But he did not think administrative measures are necessary to cool down the
market. "The investors have to learn their lessons," he reportedly said.
The Shanghai Composite Index hit an intra-day low of 2,766.747 points before
ending at 2,786.34. Declining shares far outnumbered advancing ones by 693 to 81
on the Shanghai Stock Exchange and by 471 to 57 in Shenzhen.
The turnover in the Shanghai Stock Exchange hit 86.14 billion yuan and the
Shenzhen bourse saw a turnover of 42.49 billion yuan.
This month, authorities have shown signs of cracking down on what they may
consider excessive fund flows into stocks. There are many such flows -- the
Shanghai Securities News estimated on Wednesday that several billion yuan had
been raised to buy stocks by people hocking personal possessions at pawn shops.
The government has said it will enforce a land appreciation tax, while the
banking regulator ordered banks to enforce a ban on the investment of loan money
Sinopec (China PetroChemical Corporation) dragged on the Shanghai index
Wednesday as it lost 8.76 per cent to end at 9.68 yuan. The property shares
continued their downward trend, with Wanke, the nation's biggest publicly traded
property developer, falling 9.4 percent to 15.31 yuan.