Chinese Stocks Experience Decline

Chinese stocks experienced a decline, thereby dragging down the benchmark gauge the most in last 7 days, as investors became concerned on the official measures to rein in home prices. It is feared that this decision will hurt the corporate earnings. The benchmark gauge Shanghai Composite Index experienced a tumble of 1.3%, marking the biggest decline since 18th March and is currently at 2297.67. On yesterday, it experienced a decline of 0.1%, after rallying by 3.9% to a 2-week high figure. On the other hand, the CSI 300 Index, which tracks stocks in both Shenzhen and Shanghai, declined by 1.5% and is at 2575.05 now. The benchmark gauge of Hong Kong, Hang Seng China Enterprises experienced a tumble of 0.3%.

According to an Analyst of Huaxi Securities Co., Cao Xuefeng, investors are concerned that property curbs will be impacting the Chinese economy and as a result, they started to sell the bigger stocks, especially the ones related to financial industry. Xuefeng, however, added that this is expected to sell-off for short term and investors will be back soon, as the prices will stay reasonable.

From its peak value experienced on 6th February, the Shanghai Composite Index has declined by 5.6%, as many fear that the economic recovery process of this Asian powerhouse is faltering at this moment. On 21st March, the Purchasing Managers’ Index showed that manufacturing industry of the country is expected to expand at a faster speed in March and this attributed to the rally of the gauge on last week. Apart from that, the Senior Fellow at Yale University, Stephen Roach stated that Chinese economy is on a recovery mode, after the slowdown.

The Shanghai Composite Index is now at 9.4 times of the projected earnings of last 12 months, while the average for last 7 days has been 15.8 times. The trading volume on today was 8.6% less than the average of last 30 days. The 30-day volatility increase to 19.8 on today; its highest level since 22nd March.

Among companies, after the report of China Securities Journal stated that numerous banks have started to control the scale of loans for property development, China Minsheng Banking Corp. has experienced the biggest decline in last 2 weeks. Among brokerages, the biggest loser was Haitong Securities Co., which declined by 4.3%. As net 2012 income tumbled, Dongfeng Automobile Co. went down by 1.3%.