Chinese Shares Tumble 5.21 Pct on Producer Price Surge

Chinese shares plummeted 5.21 percent on Monday, reacting to news that the producer price index (PPI) for industrial products had risen 10.0 percent year-on-year in July, with the benchmark Shanghai Composite Index down 135.65 points to 2470.07.

The Shenzhen Component Index closed at 8,170.15 points, down 488.63 points, or 5.64 percent.

Combined turnover further shrank to 61.74 billion yuan (about 8.99 billion U.S. dollars) from 69.77 billion yuan on the previous trading day, with the Shanghai Composite Index touching a nearly 20-month low.

Losses outnumbered gains by 857-23 in Shanghai and 716-13 in Shenzhen.

The PPI, which measures the value of finished products when they leave the factory, was the highest since 1996, said the National Bureau of Statistics said on Monday.

Wen Lijun, a Jiangsu-based Nanjing Securities analyst, said the plunge on the previous trading day and the double-digit growth of PPI released Monday further dampened investors' confidence.

Chinese equities plummeted 4.47 percent last Friday, snapping the upward trend of the previous two trading days, tracking overnight Wall Street declines amid an oil price rebound.

Zhang Fan, a Shanghai-based Tebon Securities senior analyst, also attributed to the plunge to the loss of confidence.

Investors were jittery over the economy outlook and were also worried about the fluctuating global oil and raw material prices and stock market turbulence, Zhang said.

Of the top 20 large caps, only Shanghai Pudong Development Bank managed to climb 1.11 percent to 21.91 yuan.

Olympic theme stocks continued to suffer heavy losses on profit taking after the sector's bullish trend for several weeks before the Olympics.

Beijing Capital Tourism Co. fell 9.99 percent to 18.39 yuan, while the century-old Beijing roast duck chain Quanjude lost 10 percent to 43.36 yuan.

A steadying of global crude oil prices failed to buoy oil and airline sectors. PetroChina, the country's largest oil producer, fell 5.54 percent to 13.8 yuan while Sinopec, Asia's top oil refiner, trimmed 5.4 percent to 10.69 yuan.

China Southern, Asia's top carrier, tumbled 9.91 percent to 6.09 yuan, with the country's other two top carriers China Eastern down 10.06 percent to 6.17 yuan and Air China down 10.01 percent to 7.82 yuan.

However, Shanghai-based shares continue to boost the index up, spurred by the State Council (Cabinet)'s approved guidelines last week to further boost economic development of the Yangtze River Delta region, including Shanghai and neighboring Jiangsu and Zhejiang provinces.

Y.U.D. Yangtze River Investment Industry Co. gained 10.1 percent to 5.67 yuan, while Shanghai Tongji Science and Technology Industrial Co. jumped 9.97 percent to 8.6 yuan.

The sluggish trading volume and the failure of domestic stock market to echo most neighboring markets' rally showed that investors confidence was down at the bottom and needed to be boosted by effective measures from the government, said Li Kang, a senior analyst with Everbright Securities.

Source: CRIEnglish