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Investor at a securities brokerage in Chenzhou city, Central China’s Hunan province, May 28, 2015. [Photo/IC] |
BEIJING – Chinese shares plummeted on Thursday, with the benchmark ShanghaiComposite Index diving 6.5 percent to finish at 4,620.27 points.
The Shenzhen Component Index plunged by 6.19 percent to close at 15,912.95 points.
The ChiNext Index, tracking China’s Nasdaq-style board of growth enterprises, lost 5.39percent to end at 3,432.98 points.
The plunge comes as a growing number of brokerages tightened requirements on marginfinancing – an important engine behind a red-hot rally that has made Chinese share marketsthe best performers in the world.
The fall was also triggered by some profit-taking ahead of a new flood of initial public offerings(IPO) next week, which some analysts estimate could freeze up around 5 trillion yuan ($807billion) of liquidity.
On Thursday, at least three Chinese brokerages, including Guosen Securities Co, SouthwestSecurities Co and Changjiang Securities Co tightened margin financing rules to tame risks inthe market, which has surged over 140 percent over the last 12 months, fueled in large partby a record amount of borrowed money.
Separately, the Shanghai Securities News reported on its website that regulators haverecently urged banks to submit data regarding money flows into the stock market.
Tightening by brokerages is having an psychological impact on the market, which is alreadysuffering from liquidity concerns ahead of the wave of IPOs next week, said Zhou Lin,strategist at Huatai Securities.
“It’s a normal correction. I think the negative impact on the market could be just short-term aswe see a lot of money continuing to flow into the stock market,” he said.
“The government will likely continue to ease monetary policy, so the bull market will continue.”
In its 2014 annual report published on Wednesday, China’s central bank warned ofdeflationary pressure in the world’s second-largest economy as it forecast subdued consumerprices for the year and a challenging growth outlook.
Most sectors were down in China, with financial shares and real estate stocks leading thedecline.
In Hong Kong, Milan Station Holdings shares bounded about 4 percent after slumping 46percent during the previous session. The company said it was not aware of any reasons forthe share price tumble.
The holding company that sells handbags and other luxury items is the latest firm to berocked by big price swings following Hanergy Thin Film Power Group and Goldin PropertiesHoldings last week.
ChinaDaily