Business / Markets

Equities dip as volatility erases gains

By LI XIANG (China Daily) Updated: 2015-10-22 10:04

New-energy vehicles, sports, logistics, satellite firms face selling pressure

Stock prices declined on Wednesday amid growing profit-taking pressure and rising uncertainties over future market prospects.

The Shanghai Composite Index declined 3.06 percent or 104.65 points, to close at 3,320.68 points, while the Shenzhen Component Index tumbled 5.87 percent to close at 10,915.99 points. The ChiNext, the startup index that tracks the country's high-tech companies, suffered even heavier loss by dropping 6.63 percent.

The market fluctuated between gains and losses during the morning trading. It dived after trading resumed in the afternoon with more than 800 stocks dropping by the 10 percent daily trading limit.

Stocks in sectors like new-energy vehicles, logistics, satellites and the sports industry, which previously outperformed the overall market, saw the biggest losses on Wednesday.

But the surge in banking shares helped recoup some of the losses toward the close and managed to lift the benchmark gauge above the level of 3,300 points. Shares of the Industrial and Commercial Bank of China jumped 6 percent to close at 4.77 yuan ($0.75).

Analysts said Wednesday's volatile trading indicated an increasing divergence among investors over the future direction of the market after the Shanghai index rebounded by 17 percent from its August low.

"The market is now under obvious resistance to go up further as the rebound momentum is gradually losing steam," Wang Zhen, an analyst with China Merchants Securities Co Ltd, wrote in a research note.

While most analysts believed that the foundation of the latest rebound remains intact, short-term technical corrections can be expected as some investors will engage in straightforward profit-taking amid the market rebound.

"It is a normal technical correction as investors have been waiting for the opportunities to lock up their previous gains," said Qian Qimin, an analyst at Shenwan Hongyuan Securities Co Ltd.

Most market observers believe that the logic for a bull run in China's A-share market remains unchanged as investors have been expecting more fiscal stimulus and monetary easing by the top policymakers to rein in the country's economic slowdown.

Meanwhile, personnel changes at the China Securities Regulatory Commission, the nation's top securities regulator, have also sparked investor expectation for long-term positive changes in the equities market.

Fang Xinghai, who is currently a bureau director at the Office of the Central Leading Group for Financial and Economic Affairs, the country's highest-level agency for financial and economic policies, has been appointed vice-chairman of the CSRC. The 51-year-old Fang will replace the current CSRC vice-chairman Liu Xinhua who will retire soon, Chinese media reported on Wednesday citing sources close to the matter.

Fang has been regarded highly by professionals and top leaders in Beijing for his extensive experience in both domestic and international financial markets. He previously worked at the World Bank, China Construction Bank Corp and the Shanghai Stock Exchange.

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