Chinese stocks sink again, now off 10% on economy fears
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Gravity has taken over in the Shanghai stock market.
Doubts about the Chinese economy triggered another torrent of selling Wednesday, driving the Shanghai composite share index down 152 points, or 4.7%, to 3,112.72.
The index now is off 10.3% from its recent peak reached Aug. 4, its biggest setback since late February.
At its recent high the market was up 91% for the year as speculators poured in, betting that the country’s economic-stimulus program would keep growth on track.
But the commerce ministry warned Wednesday that China’s domestic demand was unlikely to ‘provide a full remedy for the sharp contraction in external demand,’ meaning exports.
‘Despite a more self-evident economic turnaround in China, the prospect for the world economy remains unclear and the downside risk to external demand remains significant,’ the ministry said.
What’s more, the government’s new efforts to restrict bank lending -- after encouraging a lending boom in the first half of the year -- appear to be taking hold.
From Bloomberg News:
‘China’s new loans plunged to 355.9 billion yuan ($52 billion) in July, less than a quarter of advances in June, official data yesterday showed. China Construction Bank Corp. President Zhang Jianguo said last week the world’s second-most valuable bank will cut new loans by 70% to avert a rise in bad debt. ‘ ‘The slowdown in new lending is an excuse for investors to exit a market that’s risen too fast and gotten too expensive,’ said Philippe Zhang, chief investment officer at AXA SPDB Investment Managers in Shanghai. ‘Investors should sell China’s stocks as the market is in ‘bubble territory’ and share prices already reflect expectations for a rebound in the economy and earnings, Shenyin & Wanguo Securities Co. said in a report yesterday.’
-- Tom Petruno