Chinese stocks sink 4.47 pct amid global turmoil

(Xinhua)
Updated: 2008-09-16 20:00

On Monday, the PBOC announced the benchmark interest rate for one-year yuan-denominated loans would be lowered 0.27 percentage point on Tuesday, its first cut since October 2004.

Qin told Xinhua that the lending rate cut, without a corresponding change in the deposit rate, dealt a blow to the financial sector since it would hurt commercial banks because of a smaller margin between loan and saving rates.

Eight banks' shares, including the Industrial Bank, the Merchants Bank and Pudong Development Bank, plunged by the 10 percent daily limit, which Qin said was highly unusual.

The interest rate adjustment, however, bolstered investor confidence in the property market and real estate stocks rallied on news of the rate cuts, as the industry relies heavily on bank loans.

Guoxing Rongda Real Estate rose by the daily limit of 10 percent to 6.26 yuan and Poly Real Estate Group gained 4.8 percent to 11.8 yuan.

However, China Vanke declined 0.89 percent to 5.58 yuan. The company is embroiled in a dispute with buyers who have demanded that it reimburse them for price cuts offered after they bought their homes.

According to Qin, investors were very pessimistic, perhaps excessively so, as they didn't foresee an end to the slowdown in the Chinese economy and were very worried over the US financial upheaval.

Also on Monday, the central bank lowered the reserve requirement ratio for small and medium-sized banks, which demonstrated government resolve to boost the economy, analysts said.

Qin said the adjustment was positive and indicated a major change in the government's macro-economic policies.

He added that Chinese stocks were not expected to witness a turnaround in the near future based on current conditions.

The upcoming launch of the Shenzhou-7 spacecraft stimulated aviation stocks, which resisted the overall market plunge. China Spacesat Co. gained 4.12 percent to 16.19 yuan and Long March Launch Vehicle Technology Co. gained 2.5 percent to 8.61 yuan.

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