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Chinese shares tumble 4 percent, biggest 1-day drop in 6 months, amid bubble worries

Chinese shares tumble 4 percent, biggest 1-day drop in 6 months, amid bubble worries

Chinese stocks tumbled Thursday, with the key Shanghai Composite Index losing 4 percent in its biggest one-day decline in more than six months.
Analysts forecast more volatility amid worries that the markets, which more than doubled in value over the past year, may be priced too high.
The benchmark Shanghai Composite Index fell 4 percent to 2,857.36, off a record closing peak of 2,975.13 hit a day earlier. It was the index's biggest single-day loss since a 4.8 percent drop on July 13, 2006.
The Shenzhen Composite Index fell 4.3 percent to 675.78.
Investors sold heavyweights like insurer China Life and refining giant China Petroleum & Chemical, cashing in on recent gains.
"The domestic market is an expensive market with shares trading at about 40 times corporate earnings," said Li Shiming, an analyst at Galaxy Securities.
But he said the markets were still very promising given ample liquidity and China's strong economy.
"That's made the market's near-term trend very unclear," Li said.
China reported Thursday that its economy grew at an annual rate of 10.7 percent in 2006. The data, which are likely to be revised in coming months, are likely to mean good corporate earnings and strong stock market performance in the long-run.
So-called "A shares," denominated in Chinese yuan, slumped to match Hong Kong-dollar denominated "H shares" of the same companies.
China Life Insurance, which also has shares traded in Hong Kong, plunged 7 percent to 40.84 yuan. China Petroleum & Chemical, also known as Sinopec, fell 4.2 percent to 10.00 yuan.
Similarly, Industrial & Commercial Bank of China, or ICBC, shed 4.5 percent to 5.28 yuan and Bank of China fell 5 percent to 4.79 yuan.
"In the short term, companies with growth prospects, such as high-tech ones, may attract more attention as opposed to the recent fever for financial names and heavyweights. But the overall market will likely consolidate further," said Chen Huiqin, an analyst at Huatai Securities.
In currency dealings, the dollar's weakness against the yen helped push the yuan to a new high against the U.S. dollar.
Late Thursday, the dollar was at 7.7683 on the over-the-counter market, its lowest level since the current foreign exchange system was set up in July 2005. Wednesday's close was 7.7725.


Updated : 2021-07-24 20:08 GMT+08:00