Chinese stocks sink amid global financial turmoil

September 16th, 2008 - 5:37 pm ICT by IANS  

Lehman BrothersBeijing, Sep 16 (Xinhua) Chinese shares plunged 4.47 percent amid global financial turmoil Tuesday, as investors reacted to losses on Wall Street and the People’s Bank of China’s (PBOC) decision to slash interest rates. Debt-heavy property stocks, however, bucked the powerful downtrend, while aviation issues got a lift from China’s upcoming space launch.

The benchmark Shanghai Composite Index lost 93.03 points, sinking below the 2,000-point mark to close at 1,986.64. It touched an intra-day low of 1,974.39 late in the afternoon. The Shenzhen Component Index closed at 6,873.61 points, down 61.46 points, or 0.89 percent.

Aggregate turnover was just 47.41 billion yuan ($6.87 billion). Losses outnumbered gains by 1,328 to 325, while 186 stocks were unchanged.

Banks, securities firms and insurers led the plunge.

The Industrial and Commercial Bank of China fell 9.95 percent to 3.8 yuan and the China Construction Bank sank 9.94 percent to 4.26 yuan. Northeast Securities lost 6.87 percent to 14.92 yuan.

The sector was hurt by a weekend of upheaval among US financial institutions and the global market reaction Monday, when the Chinese market was closed for a national holiday.

After Lehman Brothers filed for bankruptcy and Merrill Lynch agreed to be taken over by Bank of America, the Dow Jones Industrial Average tumbled 4.42 percent, the steepest drop since the Sept. 11, 2001 attacks.

The Dow’s plunge triggered a global equities downturn, with Japan’s Nikkei Index falling 4.95 percent and the market in Taipei losing 4.88 percent Tuesday.

Monday’s decision by the PBOC to cut loan rates hit commercial banks, which are expected to be hurt by a smaller margin between loan and saving rates.

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

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.

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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