Friday, 21 August 2015 15:08
SHANGHAI: Shanghai stocks closed down 4.27 percent on Friday after a gauge of manufacturing activity tumbled to its lowest in more than six years, showing more weakness in the world’s second-largest economy, dealers said.
China’s benchmark Shanghai Composite Index plunged 156.55 points to 3,507.74 on turnover of 450.6 billion yuan ($ 70.6 billion), but managed to end just above the key 3,500 point level.
The Shanghai index lost 11.54 percent for the week on worries over the flagging economy, a surprise currency devaluation last week and the possibility of weaker government support for the market.
It closed at almost exactly the same level as the bottom of a recent market rout on July 8 — before Beijing stepped in with a vast rescue package — when it ended at 3,507.19 points.
The Shenzhen Composite Index, which tracks stocks on China’s second exchange, slumped 5.39 percent, or 116.09 points, to 2,039.40 on turnover of 418.8 billion yuan. It fell 11.73 percent over the week.
The preliminary reading of Caixin’s Purchasing Managers’ Index (PMI) came in at 47.1 in August, falling from July’s final reading of 47.8 and the worst since March 2009.
A figure above 50 indicates growth, while anything below signals contraction.
“The weak PMI figure released today weighed on market sentiment as investors are concerned about the weakening economic performance,” Zheshang Securities analyst Zhang Yanbing told AFP.
“Investors panicked after the market fell to the previous low point during the July slump,” he said.
Chinese shares have been extremely volatile in recent weeks, plunging almost a third from June, after having risen over 150 percent in the preceding 12 months.
Following the market collapse, Beijing intervened with a rescue package that included funding the state-backed China Securities Finance Corp. (CSF) to buy stocks on behalf of the government and barring major shareholders from selling their stakes.
Despite reassurances by the market regulator that the CSF will continue to soothe market volatility, sentiment remains poor.
“If people can’t see long-term prospects for the economy, the market won’t go up too much in the short term,” Shen Zhengyang, an analyst from Northeast Securities, told AFP.
Brokerage firms fell in Shanghai. China Merchant Securities dropped 8.52 percent to 17.82 yuan while Citic Securities plunged 7.85 percent to 18.20 yuan.
Energy giants lost ground on weak global oil prices. In Shanghai, PetroChina fell 3.10 percent to 10.00 yuan and Sinopec gave up 2.14 percent to 5.48 yuan.
