The Benchmark Index of China Drops below 2000 Mark

For the 1st time in last 4 years, the benchmark index of China has closed below 2000. The value of the shares traded in the stock market of China slumped to the lowest value in last 4 years as health care and material companies suffered high losses. The SHCOMP actually plummeted by 1.3% and is currently at 1991.17. So far, the index has fallen by more than 9.5% in 2012. The index is actually heading towards a 3rd straight annual loss. Transaction of shares worth $5.3 billion was done today which is the lowest since 7th November, 2008.

Shanghai River Fund Management’s General Manager Zhang Ling stated that the Chinese Regulatory Authorities should roll out certain policies to encourage more investment in the country’s stock market. They really need to gain back the confidence of the investors.

Share prices of Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co. plummeted by 4.5%. The traditional medicine-maker Shandong Dong-E E-Jiao’s shares went down by 3.1%. JiuGuiJiu Co. shares also declined by 10% as reports surfaced that the liquor maker will halt its production so that the equipment can be replaced.

Guo Shuqing, the Chairman of China Securities Regulatory Commission recently announced the decision of lowering the transaction fees on the equity trades. Guo also requested the companies to pay more cash dividends. Changes were also brought to the way initial public offerings were priced. However, according to analysts, these changes will take some time to impact and investors are currently not interested in the long term solutions. Despite the better results for the 2nd largest economy of the world, investors are still not lured back.

Wang Zheng, the Chief Investment Officer of Jingxi Investment Management, trading values will drop further down for Chinese stocks and the Government is still lagging behind to take urgent steps so that the situation can be reversed.

However, there are others who feel differently about the Chinese economy. Chongkyu Juhn who works as a strategist for Samsung Securities stated the stability will again be visible in the Chinese stocks within the 1st quarter of 2013. Chongkyu added that the new Government is expected to come up with growth inducing policies thereby helping improvement in the macro conditions. In future, the SHCOMP is expected to range between 2000 and 2400, as mentioned by Chongkyu.