Small-cap plunge drags mainland stocks lower

Source:Reuters-Global Times Published: 2017/7/17 17:48:40

Sharp drops in highly speculative small-cap stocks pulled the major stock indexes in the Chinese mainland lower on Monday, offsetting stronger-than-expected economic growth data.

Fears of further policy tightening and a flood of supply from IPOs pulled benchmarks down by an unusually hefty 2 percent in early trade.

They briefly recouped the losses after data showed the economy expanded 6.9 percent in the second quarter, defying expectations for a slight loss of momentum.

But selling intensified again in the afternoon, with the blue-chip CSI300 index ending down 1.07 percent at 3,663.56 points, while the Shanghai Composite Index slid 1.43 percent to 3,176.46 points.

The tech-heavy start-up board ChiNext tumbled 5.11 percent, posting its worst day in 2017.

"The game of storytelling in ChiNext is over," said Shen Weizheng, fund manager at Ivy Capital.

Nearly 500 stocks, most of them small firms, plunged the 10 percent trading limit, a rare scene this year as the authorities attached great importance to maintaining stability in the stock market.

In contrast to larger, State-owned firms, including major banks, which are being buoyed most by the strong economy, an increasing number of once-high-flying start-ups are floundering.

Most sectors lost ground, led by real estate and industry shares, while gains in bank stocks, favored for their improved profitability and low valuations, failed to lift sentiment.

Posted in: MARKETS

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