Chinese stocks plunged to their lowest level in two months today, tracking regional losses on renewed jitters over the economic outlook and government policy.
Chinese stocks plunged to their lowest level in two months today, tracking regional losses on renewed jitters over the economic outlook and government policy.
The benchmark Shanghai Composite Index shed 176.24 points, or 5.8 percent, to close at 2,870.63 — the lowest since June 18 — while the smaller Shenzhen Composite Index sank 6.6 percent to 955.87.
Analysts say investors are nervous over a possible tightening of bank lending policies, which could crimp liquidity.
But the decline also reflected growing worries over the broader economic outlook after a report Friday showed American consumer confidence was weaker than expected in early August, which could mean less demand for Chinese exports.
Monday's losses extended declines that took the Shanghai benchmark 6.6 percent lower last week.
After running share prices up by more than 90 percent this year by early August, investors turned cautious on expectations of weaker bank lending for the remainder of the year after a surge in the first half.
Recent data showing that retail sales, trade and investment rose in July, but not as fast as some had hoped, have further darkened buying sentiment.
"It might be that the market is overreacting and too sensitive," said Mao Sheng, an analyst for Huaxi Securities in the western city in Chengdu. "After all, there is no solid data showing Chinese economy is doing badly."
Property shares were among the biggest losers, with China Vanke falling by 9.95 percent to 11.50 yuan and Poly Real Estate slipping 7.4 percent to 24.94 yuan.
The long rally in share prices had begun to raise worries that loose credit was fueling an unsustainable bubble in a market long prone to such gyrations.
"Property shares have gained too much recently, so they should drop on huge profit-taking. You can see that developers are just as anxious as investors," said Que Feng, an analyst with Citic Securities in Beijing.
But he added, "I think the tumble is rather irrational."
Other factors are also at play. Among the bigger decliners Monday were steelmakers, who were hurt, Huaxi Securities analyst Mao said, by news of an iron ore supply deal Monday with Australian miner Fortescue Metals Group, which agreed to a price about 3 percent below what global producers have been seeking from Chinese mills.
Baoshan Iron & Steel fell 7.6 percent to 7.44 yuan, Angang Steel Company limited fell 9.97 percent to 13.90 yuan and Wuhan Iron and Steel Group Corp. dropped 8.9 percent to 8.8 yuan.
Industrial & Commercial Bank of China, the nation's biggest bank, lost 2.9 percent to 4.69 yuan.
Resource shares were hit by weakening oil and metals prices. Aluminum Corp. of China fell by the daily 10 percent limit to 15.03 yuan while PetroChina lost 6.1 percent to 13.09 yuan. China Petroleum & Chemical Corp., also known as Sinopec, shed 5.8 percent to 12.18 yuan.
In currency dealings, the yuan was at 6.8345 to the U.S. dollar, nearly even with its close Friday of 6.8344.
