China’s stocks slide to lowest since March 2009 as small companies plunge(1)
China’s stocks (IFB1) fell to the lowest level since March 2009 on concern the European debt crisis will curb exports and a potential cash crunch before the Chinese new year holidays may boost lending costs for small companies.
China Cosco Holdings Co. (601919), Asia’s largest shipping line, dropped 4.4 percent after Luxembourg’s prime minister said the European Union is facing a recession of unknown scope. Ufida Software Co. plunged 8 percent, leading declines for technology stocks, the worst performing industry. Shanghai Pudong Development Bank Co. (600000) paced gains for lenders after the central bank refrained from selling three-month bills and investors speculated the central bank will cut lenders’ reserve requirements this month.
“Small-cap shares are falling as they had risen considerably before; it’s a rotational change,” said Wu Kan, a fund manager at Dazhong Insurance Co., which oversees $285 million. “Investors are probably keen on steadier shares like big-cap companies amid the economic downturn.”
The Shanghai Composite Index (SHCOMP), which tracks the bigger of China’s stock exchanges, slid 20.94 points, or 1 percent, to 2,148.45 at the close. The CSI 300 Index slumped 1 percent to 2,276.39.
The Shenzhen Composite lost 3.5 percent, while the ChiNext index of start-up companies plunged 5.7 percent. Anhui Anke Biotechonology (Group) Co. tumbled 9.5 percent to 9.99 yuan in Shenzhen. Gauges of technology and health-care companies in the CSI 300 dropped more than 3 percent, the most among industry groups. Ufida Software fell 2.5 percent to 16.48 yuan. Beijing Tongrentang Co., a retailer of Chinese medicine, declined 5.1 percent to 13.14 yuan.
The Shenzhen Stock Exchange will oversee the initial review of refinancing plans of ChiNext companies, Caixin Online reported today, cited unidentified officials as saying.
Shippers Decline
Speculation the securities regulators are “looking to decentralize oversight on financing plans may have had a psychological impact on investors,” said Wu. “If the Shenzhen exchange were to be in charge of refinancing for GEM-listed stocks, there would be less certainty.”
China Cosco lost 4.4 percent to 4.30 yuan. UniCredit SpA, Italy’s largest bank, said yesterday it will sell new shares in a 7.5 billion-euro ($9.8 billion) offer to strengthen its capital position. The rights offer boosted concern that lenders may struggle to raise more capital to weather the region’s debt crisis. The European Central Bank reported overnight deposits from financial institutions rose to an all-time high.
The Shanghai Composite fell 1.4 percent on the first trading day of the year yesterday, adding to a 22 percent plunge last year, on concern increases in borrowing costs and Europe’s debt crisis will derail economic growth. The CSI 300 (SHSZ300) slid 25 percent in 2011. The value of stocks traded in Shanghai slumped to the weakest level in three years on Dec. 29.
Money Rates
The People’s Bank of China refrained from selling three- month bills for a second week today, helping stem increases in money-market rates as banks hoard cash in the run-up to the Chinese New Year holiday.
