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Markets dive despite rescue measures

By Zhou Yan (China Daily)
Updated: 2008-10-09 09:04

Investors monitor price changes at a securities house in Wuhan, Hubei province. The Shanghai Composite Index dropped 3.03 percent yesterday. [China Daily]

Asian stock markets tumbled yesterday despite various governments' rescue measures, dragging the mainland index down for four consecutive trading days.

The benchmark Shanghai Composite Index slid 3.04 percent, or 65.62 points, to end at 2092.22. And the smaller Shenzhen Component Index dropped 3.58 percent to close at 6924.48 points.

The fall chopped nearly 3 percent off the total market capitalization to 13.5 trillion yuan ($1.98 trillion).

Combined turnover on the two bourses totaled 55.7 billion yuan, down 14 percent from the previous trading day.

Shares in all Asian markets ended in the red yesterday, shrugging off the latest interest rate cut moves by some central banks aimed to mitigate the impact of the global financial crisis.

The Hong Kong Monetary Authority yesterday announced it would cut in the benchmark interest rate by 1 percentage point to 2.5 percent from today to ease the credit crunch.

Australia on Tuesday also cut its interest rate by the same amount, the biggest reduction since 1992.

However, Asian markets were unmoved by the measures. Hong Kong's Hang Seng Index slid 8.17 percent to 15431.70, a record low in 28 months.

Tokyo's Nikkei 225 dived 9.38 percent to hit its lowest point since October 1987, ending at 9203.32.

Indonesia's stock trading was suspended after an over 10 percent index dive, the first since a bomb blast in 2000.

Markets in Australia, South Korea and India also suffered huge slumps.

The plunge in Asia yesterday followed a sharp dive on Wall Street overnight. The Dow Jones Industrials slid 5.11 percent, or 508.39 points, the fifth consecutive day it fell.

"The systematic risks in the global financial markets have been quickly spreading, and the series of interest rate cuts around the world indicated that governments are worried that global economic fundamentals have been deteriorated," said Zhang Fan, a senior analyst at Shanghai-based Tebon Securities.

The mainland's stock market was dragged down by banks partly because of rumors of a cut in bank interest rates to stimulate economic growth.

After the market closed, the People's Bank of China, the central bank, announced a cut in the reserve requirement ratio by half a percentage point, effective from October 15, and a 0.27 percentage point reduction in the one-year deposit and lending rates.

The one-year lending rate was cut by 0.27 percentage point this September, the first time in six years.

"The interest cut may further weaken the net profits of banks in 2009," said Everbright Securities' financial analyst Jin Lin.

Jin added that fewer shares were purchased than expected from the country's three leading commercial banks by the State-owned Central Huijin Investment Co on the previous trading days, which further hurt investors' confidence on the market.

China Construction Bank, the country's second largest bank by assets, was down 5.37 percent to 4.23 yuan, while China Merchants Bank dived 8.34 percent to close at 14.29 yuan.

After a strong rebound on Monday amid the upcoming margin trading and short selling trial program, brokers' shares also suffered huge losses, led by Hongyuan Securities, down 9.97 percent to its daily limits.

Bolstered by today's opening of the Third Plenary Session of the 17th Central Committee of the Communist Party of China and a possible stimulus package for the agricultural industry, farming-related shares rose in yesterday's trading.

Huang Yiping, Citigroup's chief Asia economist, said the Party meeting may announce changes in government spending on rural development, land tenure and the household registration system.