Shanghai stocks post largest single-day drop this year amid call for easing commodity bubbles
Shanghai stocks posted the largest daily plunge since the beginning of the year amid slumps worldwide, as authorities called for dampening speculation in commodities.
The Shanghai Composite Index fell 1.63 percent to close at 3,208.54 points today. Steel and coal mining sectors lost 6.96 percent and 6.58 percent respectively.
Commodity sellers covering crude and nonferrous metal also plummeted after the China Iron and Steel Industry Association criticized domestic speculators for hiking up steel prices.
The association warned against the “irrational price surges in steel”, and said it was caused by speculators amid overinterpretation of China’s policies on supply cut.
Before yesterday, stock prices of steel companies had risen 22 percent and coal companies 17 percent since June 2, when the upward trend began.
“Such a call has crippled the speculative bubbles lingering over the domestic stock market for past several months. It could lead to continuous drops in the near future as the market takes time to recover,” said Southwest Securities in a note.
The “real economy” sectors, including manufacturing, had been hurt by the speculated commodity prices, which also would weight on the stock market, it added.
Shanghai-listed Fangda Special Steel Technology Co plunged by the daily limit of 10 percent to 13.11 yuan (US$1.97), as did Anhui Hengyuan Coal Industry and Electricity Power Co to 11.15 yuan.
China isn’t the only market dropping, with global markets hurt by the rising tension between North Korea and the United States.
The NASDAQ Composite Index shrank 2.13 percent on Thursday, while the Hang Seng index tumbled 1.9 percent today “as investor sentiment waned when risks increased,” said Founder Securities.
Over the past week Shanghai stocks lost 1.63 percent, halting a seven-week winning streak.
“That means investors started to take profit as risk aversion is on the rise,” Founder Securities added.