HONG KONG: Shanghai and Hong Kong stocks fell to multi-week lows on Wednesday, Nov 17, on worries about how Beijing will tackle inflation including a rate rise as early as this week.
After the market closed, the China cabinet said it will take forceful measures to stabilise prices and it will increase supplies of grain, oil and sugar from the country's reserves.
Rising costs prompted McDonald's Corp to raise its menu prices in China.
"China wants to send a message to everybody that this time they are serious in fighting inflation, reducing excess liquidity and controlling speculative inflows," said Danny Yan, who helps manage more than $400 million at Tai Fook Asset Management.
The Hong Kong and China markets may continue to fall or at the most hold steady until the year-end as expectations about a possible reduction in the size of U.S. quantitative easing or QE2, in addition to inflation worries in the mainland, will keep investors away from stocks, the Hong Kong-based Yan said.
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"The concerns won't fade out unless there is a moderation in inflation. So every month, every weekend, the market will be jittery about any tightening measure in China," Yan added.
The Shanghai Composite Index fell 1.9 percent to 2,838.9 points, a new one-month low. Turnover was thin, with retail investors dumping resource issues such as Sinopec as oil prices fell.
The tumble that started last Friday has knocked 11 percent off the index, with retail investors, who account for more than two-thirds of activity, selling on the slightest hints of measures to cool the buoyant economy.
The inability of the index to break above 3,181 last Thursday has turned the technical picture quite bearish for the Shanghai Composite Index.
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The benchmark Hang Seng Index dropped 2.0 percent to 23,214.46, the lowest in nearly three weeks.
Food counters fell. Meat processor and distributor China Yurun Food Group declined 3.1 percent, instant noodle maker Tingyi Holdings lost 3.9 percent, and dairy products producer Mengnui Dairy shed 2.1 percent.
Oil, metal and other resources counters dropped as prices of oil, gold, and other materials fell.
Coal producer China Shenhua Energy fell 3.8 percent and Aluminum Corp of China declined 3.2 percent.
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CHINA'S DOWNTREND MAY CONTINUE
Analysts say a short-term downtrend is likely to continue in China's stockmarket after the index on Wednesday fell through the 250-day moving average, now at 2,891.2 points, considered a key level in the domestic market. However, mild bounces were still likely.
"The depth of this correction has already been very large, so greater falls will be limited," said Zhang Yanbing, analyst at Zheshang Securities in Shanghai.
"With inflation at a record high there is reason for tightening but this is making the market nervous."
Turnover slumped to 157.9 billion yuan ($24 billion) on Wednesday from 220.6 billion yuan on Tuesday, retreating to levels seen before the start of October's liquidity driven rally.
Miners sagged as a strong U.S. dollar weakened demand for commodities. Western Mining fell 7.1 percent while Zijin Mining slid 1.9 percent.
Oil firms weighed on the index as Sinopec fell 2.1 percent and PetroChina dropped 1.9 percent.
Some brokerage analysts remained optimistic over the medium-term outlook for the index.
Before the latest tumble kicked in last Friday, the index had jumped nearly 20 percent. The number of new stock trading accounts opened last week hit a 15-month high. - Reuters
After the market closed, the China cabinet said it will take forceful measures to stabilise prices and it will increase supplies of grain, oil and sugar from the country's reserves.
Rising costs prompted McDonald's Corp to raise its menu prices in China.
"China wants to send a message to everybody that this time they are serious in fighting inflation, reducing excess liquidity and controlling speculative inflows," said Danny Yan, who helps manage more than $400 million at Tai Fook Asset Management.
The Hong Kong and China markets may continue to fall or at the most hold steady until the year-end as expectations about a possible reduction in the size of U.S. quantitative easing or QE2, in addition to inflation worries in the mainland, will keep investors away from stocks, the Hong Kong-based Yan said.
''
"The concerns won't fade out unless there is a moderation in inflation. So every month, every weekend, the market will be jittery about any tightening measure in China," Yan added.
The Shanghai Composite Index fell 1.9 percent to 2,838.9 points, a new one-month low. Turnover was thin, with retail investors dumping resource issues such as Sinopec as oil prices fell.
The tumble that started last Friday has knocked 11 percent off the index, with retail investors, who account for more than two-thirds of activity, selling on the slightest hints of measures to cool the buoyant economy.
The inability of the index to break above 3,181 last Thursday has turned the technical picture quite bearish for the Shanghai Composite Index.
''
The benchmark Hang Seng Index dropped 2.0 percent to 23,214.46, the lowest in nearly three weeks.
Food counters fell. Meat processor and distributor China Yurun Food Group declined 3.1 percent, instant noodle maker Tingyi Holdings lost 3.9 percent, and dairy products producer Mengnui Dairy shed 2.1 percent.
Oil, metal and other resources counters dropped as prices of oil, gold, and other materials fell.
Coal producer China Shenhua Energy fell 3.8 percent and Aluminum Corp of China declined 3.2 percent.
''
CHINA'S DOWNTREND MAY CONTINUE
Analysts say a short-term downtrend is likely to continue in China's stockmarket after the index on Wednesday fell through the 250-day moving average, now at 2,891.2 points, considered a key level in the domestic market. However, mild bounces were still likely.
"The depth of this correction has already been very large, so greater falls will be limited," said Zhang Yanbing, analyst at Zheshang Securities in Shanghai.
"With inflation at a record high there is reason for tightening but this is making the market nervous."
Turnover slumped to 157.9 billion yuan ($24 billion) on Wednesday from 220.6 billion yuan on Tuesday, retreating to levels seen before the start of October's liquidity driven rally.
Miners sagged as a strong U.S. dollar weakened demand for commodities. Western Mining fell 7.1 percent while Zijin Mining slid 1.9 percent.
Oil firms weighed on the index as Sinopec fell 2.1 percent and PetroChina dropped 1.9 percent.
Some brokerage analysts remained optimistic over the medium-term outlook for the index.
Before the latest tumble kicked in last Friday, the index had jumped nearly 20 percent. The number of new stock trading accounts opened last week hit a 15-month high. - Reuters
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