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China Stocks Sink 8.8% on Crackdown Fears
Reuters via CNBC
Chinese stocks plunged nearly 9% Tuesday, erasing about $140 billion of value in their biggest fall for a decade, amid fears that authorities would crack down on speculation that drove shares to record highs.
Traders said the slide did not appear to be triggered by concrete news. Institutions scrambled in hectic trade to lock in large gains made early this month, while some funds sold to raise money to pay dividends in March.
The tumble came a day after the main index jumped to an all-time high, bringing its gains for this year to 14%. The market soared 130% last year, making it the world’s best-performing major market.
“This kind of terrifying fall means the market has become abnormal,” said analyst Chen Huiqin at Huatai Securities, adding that shares could take a while to stabilize even if negative rumors about government policy proved false. ..
The market was hit by several negative rumors in late trade, including talk that authorities would take strong steps to cool speculative activity.
The government announced on Sunday that it had set up a top-level task force to clamp down on illegal securities trading. Authorities had already signaled that another crackdown was coming, and it is not clear how harsh it will be.
There was talk of an imminent interest rate hike after poor inflation data in the past two months. The central bank raised bank reserve requirements on Sunday. Investors were also unsettled by a rumor that Shang Fulin, chairman of the China Securities Regulatory Commission, might resign to take a political post. A senior CSRC official, contacted by Reuters, denied this. ..
(27 Feb 2007)
Thailands market plunge in December also followed suggestions of regulatory tightening against purely speculative investors. Coincidence maybe, more likely evidence of the size, ruthlessness and arguably corruptness of much speculative investment.-LJ
Asian Stocks Fall, Adding to Global Rout After China’s Slump
Stuart Kelly, Bloomberg
Asian stocks fell the most in more than seven months, extending a global selloff sparked by the biggest plunge in Chinese shares in a decade. BHP Billiton Ltd. and Posco led declines.
In the U.S, the Dow Jones Industrial Average dropped as much as 546 points, the most since the first trading day after the Sept. 11, 2001, terrorist attacks. Chinese stocks yesterday fell the most in a decade after the government took measures to crack down on excess speculation that had driven shares to records.
“This will reverberate in Asian markets again today,” said Shane Oliver, who helps manage about $64 billion at AMP Ltd. in Sydney. “China’s market has been poised for a correction for some time, which has made other Asian markets vulnerable too.” ..
Stocks fell after the State Council, China’s highest ruling body, approved a special task force to clamp down on illegal share offerings and other banned activities in the market.
China’s government has introduced several measures over the past year to calm the stock market. Banks were urged to stop lending money for stock investments and to recall outstanding loans, the China Banking Regulatory Commission said Dec. 31. The People’s Bank of China, the central bank, ordered banks to boost reserves four times in the past year to reduce money available for investment. ..
(27 Feb 2007)
U.S. stocks plunge to worst 1-day drop since 2001
Nick Godt, MarketWatch
NEW YORK — U.S. stocks plunged to their worst one-day performance since 2001 on Tuesday, with the Dow Jones Industrial Average losing 200 points in one minute around 3 p.m. before recovering some ground by the close, after a sell-off in China fueled concerns about growth.
Concerns that tighter credit conditions in China and Japan might dampen global growth first sent Shanghai sliding 9% overnight before the sell-off spread to other markets. ..
After sliding all day, U.S. stocks seemed to fall off a cliff in the afternoon, as data providers failed to keep up with selling programs, noted Stephen Sachs, head of trading at Rydex Investments. “There’s not even a flight to quality into gold or the Swiss franc, which tells me that we’re closer to the beginning than to the end of this,” Sachs said. ..
(27 Feb 2007)
