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Bank rally sweetens bitter pill

By Zhou Yan (China Daily)
Updated: 2008-09-19 10:44

An investor is glued to the screen at a securities house in Wuhan, Hubei Province. [China Daily]

The recovery of bank shares after a technical correction in the afternoon helped lessen the impact of the global stock market crash on mainland bourses yesterday.

The benchmark Shanghai Composite Index slid 33.21 points, or 1.72 percent, to close at 1895.84, with 795 out of 963 stocks closing lower, while the smaller Shenzhen Component Index plunged 116.99 points to end at 6563.07.

The combined turnover on the two bourses reached 60.76 billion yuan, up 37.2 percent from Wednesday, while total market capitalization shrank 1.8 percent to 12.37 trillion yuan yesterday.

Analysts said major stocks should take the blame for the straight fall yesterday, with seven out of the top 10 heavyweights tumbling on the two bourses. Both China Ping An Insurance and China Life Insurance fell below their IPO issue prices.

China Ping An fell 8.64 percent, or 2.9 yuan, to 30.66 yuan, while China Life was down 4.48 percent to close at 18.97 yuan.

"The continuous slumps in the US market overnight caused panic among Chinese investors fearing a longer southward trend in the market, making insurance and securities firms fall sharply," said Wu Feng, an analyst at TX Investment Consulting Co Ltd.

On Wednesday, the Dow Jones slid 449.36 points to close at 10609.66, a fresh low since 9/11.

All securities shares were down yesterday, led by Hongyuan Securities, which dropped 6.19 percent to 13.78 yuan.

Bank shares, besides China Construction Bank and Bank of Communications, rebounded in afternoon trading after drops in the morning, led by Nanjing Bank with a 10.07 percent increase to 8.42 yuan.

Bank of China gained 2.69 percent to end at 3.05 yuan, and Industrial and Commercial Bank of China was up 0.58 percent to 3.44 yuan.

"The recovery of bank shares is a short-term correction, but the long-term performance of banks remains unclear as the latest interest rate cut may hurt bank's earnings," Wu noted.

TX Investment Consulting lowered its forecast for lenders' 2009 net profit growth to 13 percent from its previous figure of 19 percent.

Caught up in the tainted baby milk scandal, shares in Inner Mongolia Yili Industrial Group fell to its daily limit of 10.01 percent to close at 10.88 yuan.

"In a bearish market, any negative news would cause a severer than expected response from investors. Consumers' concerns on food safety have deepened with the unfolding tainted milk scandal," Wu said.