Stocks dive 2.14% in response to tightening prospects, 07/04
Updated: 2007-07-04 15:44
Stocks in the food, agriculture and real estate sectors performed better. B shares were down. Of the 109 listed B shares, 81 closed down and five finished flat.
The recent turbulence has scared new investors away from the volatile market. New A-share account opening on Monday dropped to 99,957, the lowest since March 6. New B-share and mutual fund account were also down, to 780 and 35,006, respectively.
According to statistics compiled by the fund research center of China Galaxy Securities, the combined assets of 347 mutual funds rose 201 percent in the past six months to 1,799.07 billion yuan. At the same time combined assets of equity funds jumped 127 percent to 1,671.12 billion yuan, accounting for 31.25 percent of the circulating A-share market value. The number of equity funds also increased from 230 to 251.
As the latest move by red chips listed in Hong Kong to return home market, China Shenhua Energy Co said yesterday that it plans to issue shares on the Shanghai Stock Exchange and to increase its holdings of parent company assets.
The company said in a regulatory notice that it would issue up to 1.8 billion shares denominated in yuan, and use proceeds from the Shanghai offering to improve the company's operations and to buy assets from its state-owned parent, Shenhua Group Corp. The money would also be used to buy overseas assets, said the notice.
The Shanghai initial public offering is subject to regulatory and shareholders' approval. Pricing would depend on market conditions, it said, so the amount of funds to be raised was not specified.
In the second half, the People's Bank of China (PBOC) will focus on adjustments over its foreign currency policies and management of liquidity in the banking system, said the central bank monetary committee yesterday. It will adopt multiple monetary instruments to keep prices at appropriate levels. The central bank will also target balanced growth in credit and debt growth, said the conference.
According to a report released by PBOC recently, China's trade surplus has increased the country's foreign exchange reserves and resulted in an affluence of capital and excessive liquidity since last year.
This year, the central bank has raised interest rates twice and required bank reserve ratio five times. However, analysts expect further interest rate and reserve ratio hikes in the coming months.
Last week, the Ministry of Finance was authorized to issue 1.55 trillion yuan special treasury bonds for exchange of US$200 billion forex reserves from the central bank. The bonds, which will be issued by PBOC to institutional investors including banks, insurers and the social security fund, will help rein in excessive capital floating in the market to alleviate the pressure from the liquidity problem, said Minister of Finance Jin Renqing earlier.
The conference stressed that it will improve the managed floating rate system in its foreign exchange policy. It aims to promote demand-and-supply-oriented market mechanism in the exchange rate formation system, and maintain a reasonable, stable and balanced yuan exchange rate. Yuan exchange rate hit a new high yesterday by surpassing the 7.60 yuan to one dollar mark.
The 1.55 trillion special treasury bonds will have terms of over ten years, unlike most of the other T-bonds with three to seven years of maturity. The longer term helps to constitute a complete return curve and deeply freezing excessive liquidity, said analysts.
Another feature of the bonds is the floatable book-entry format they will adopt. Face value or rates of the bonds is yet to be decided on the market rates, according to the People's Daily.
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