Chinese stocks in free fall
July 27, 2015
The CSI300 index of the largest listed companies in Shanghai and Shenzhen fell 8.6 percent to 3,818.73 points on Monday, while the Shanghai Composite Index lost 8.5 percent, to 3,725.56 points.
The drops were the biggest since February 2007. Analysts cited unease over the sustainability of state-backed measures to prop up the economy in the last few weeks as a possible cause for the rout.
But it wasn't immediately clear why the tumble came so suddenly in the afternoon session. At midday, the two indexes were down only down by 2.5 percent.
"The recent rebound had been swift and strong, so there's need for a technical correction," said Yang Hai, strategist at Kaiiyuan Securities.
He said the trigger was "a sluggish U.S. market amid stronger expectations of a Fed rate rise in the fourth quarter. That, coupled with China's rising pork prices, fuels concerns that China would refrain from loosening monetary policies further."
Gloomy data
Early in the day, Yang Delong, fund manager at China Southern Asset Management wrote clients: "A rapid, post-rout rebound in mainland 'A' shares has ended, and the market has entered a stage of fluctuations, with investor sentiment increasingly unsteady."
Investor sentiment was soured by official data released on Monday showing that profit at China's industrial firms dropped 0.3 percent in June from a year earlier, reversing a 0.6 percent rise in May.
This has added pressure on an economy that is struggling to regain momentum after data on Friday showed China's factory sector contracted the most in 15 months in July as shrinking orders depressed output.
Stocks dropped across the board, with 2,247 companies posting losses, leaving only 77 to post gains.
bea/cjc (Reuters, AFP)