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Market sneezes after US cold

By Bi Xiaoning (China Daily)
Updated: 2009-02-25 08:10

China's benchmark stock index declined for the first time in four days, dragged lower by the deepening economic downturn and sluggish overseas stock markets, analysts said.

Related readings:  Stock surge in smaller banks lifts market  US stock market falls to 1997 levels

The benchmark Shanghai Composite Index (SCI) fell about 4.56 percent to close at 2,200.65 points. The smaller Shenzhen Component Index also dropped 3.72 percent to close at 8,403.02 points. The combined turnover on the two bourses was 250.43 billion yuan yesterday.

"We are seeing new lows in the US and European equities markets. This has led to the fall in A-share prices," said Zhang Gang, analyst with Zhongyuan Securities Co.

"China's A-share market may fluctuate for long periods this year, floating between 2,000 and 2,300 points," said Zhang.

The Standard & Poor's 500 Index slid to a 12-year low on Monday in the US while in Europe, the Dow Jones Stoxx 600 Index dropped to a six-year low.

Bruce Kasman, chief economist with JPMorgan, predicted that the US will start to recover in the second half due to improved credit market activity, stabilizing home sales and lower energy prices.

Over 80 percent of A-share stocks dropped yesterday. Commodities producers led the fall over concerns that the global recession will curb demand for raw materials.

PetroChina Co and China Petroleum & Chemical Corp, the nation's biggest oil producers, declined after crude prices dropped. Their shares fell by 4.11 percent and 6.67 percent, respectively. Baoshan Iron & Steel Co slid after UBS AG said global steelmakers have raised output too quickly in response to a bounce in Chinese demand. It fell by 5.62 percent to 5.71 yuan.

Financial sector shares slumped by about 7 percent with securities firms leading the fall. Haitong Securities Co fell by 10 percent, and some other brokerages, including CITIC Securities and Northeast Securities, dropped by about 9 percent.

Automobile shares, however, saw a big jump on the back of a support plan released yesterday by the government which said "the current 14 automobile companies will be combined to 10". Chongqing Changan Automobile Co responded by jumping 10 percent.