Chinese stocks plunge in Monday morning trading

Source:Global Times Published: 2019/5/6 13:04:56

China's A-share markets plunged Monday morning, with the benchmark Shanghai Composite Index slipping below 3,000 points while the Shenzhen bourse also suffering a steep fall. 

But securities analysts said that considering China’s healthy economic indicators, investors need not panic. 

As of the end of Monday's morning session, the Shanghai Composite Index slipped by 5.19 percent to 2,918.65 points, while the Shenzhen Component Index fell by 6.15 percent to 9,079.74 points.   

A total of 236 stocks slipped to their trading ceiling of 10 percent, with high-tech shares leading the plunge.

Li Daxiao, chief economist at Shenzhen-based Yingda Securities, called the plunge a “correction” as mainland stocks had been enjoying a bull run in the past few months. 

The Shanghai index climbed to 3,270 points on April 19 from 2,514 points on January 4. 

Notwithstanding the plunge, recent economic indicators in China point toward an upward trend. 

The Caixin services purchasing managers’ index (PMI), which was released on Monday, surged to a 15-month high of 54.5 in April. 

China’s GDP rose 6.4 percent year-on-year in the first quarter, exceeding market expectations. 

“Judging from those positive economic signs, as well as overseas capital demand for mainland shares, I don’t think investors should panic,” Li said. 

The government is also taking measures to boost the domestic economy by releasing liquidity. 

On Monday, just ahead of the A-share market opening, the People’s Bank of China, the country’s central bank, announced that it will cut reserve requirements for small and medium-sized banks, starting from May 15. 

The move is expected to release 280 billion yuan ($41.57 billion) into the market, which will be used for loans to private and small and micro-sized firms, according to a central bank statement. 

Yu Fenghui, a Beijing-based financial commentator, said that such a liquidity release would also help boost the A-share market, which would offset any negative external influence on the mainland markets. 

The mainland stock plunge took place after US President Donald Trump said on Monday morning on his Twitter account that the US would raise import taxes from the current 10 percent to 25 percent on $200 billion worth of goods from China on Friday.

Yu said that the sudden development in China-US trade dispute was “unexpected” by investors, as what had been leaked to the public about the China-US trade talks so far had been mostly on the positive side. “The markets don’t have time to digest this piece of news, and so they would overreact a bit,” he said. 
Global Times 

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