Markets

Stocks decline to eight-month low - Thursday

By ZHANG SHIDONG (China Daily)
Updated: 2010-05-07 09:12

Investor gloom deepens on property curbs, growing European debt crisis

SHANGHAI - China's stocks plunged, driving the benchmark index to an eight-month low, on concern a European debt crisis and Chinese government curbs on property will hurt economic growth.

A stop sign in front of new construction in Lujiazui, Pudong district, Shanghai. Home sales plunged nearly 40 percent by both units and floor space in 15 major cities in China last week. [ZHANG CHI / FOR CHINA DAILY]

Jiangxi Copper Co and Aluminum Corp of China Ltd, the nation's biggest makers of the metals, dropped more than 5 percent as commodity prices tumbled. China Vanke Co, the largest listed developer, fell 4.1 percent as brokerages said home prices may drop 30 percent.

Huaxia Bank Co slumped 10 percent after saying it plans to raise capital. Losses worsened in the afternoon on speculation inflation accelerated in April.

"In the long run, we face the risk of the property bubble bursting," said Xu Lirong, who oversees about $2.6 billion at Franklin Templeton Sealand Fund Management Co in Shanghai. "If that happens, it'll be a catastrophe for the economy and the stock market."

The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, slid 117.45, or 4.1 percent, to 2,739.70, its lowest close since Sept 2. The CSI 300 Index retreated 4.6 percent to 2,896.86. Futures on the CSI 300 expiring on May 21, or the most active contract, lost 3.4 percent to 2,972.6.

The Shanghai gauge has slumped 16 percent in 2010, Asia's worst performer, as the government unwound monetary stimulus and stepped up measures to cool inflation and prevent a housing bubble inflated by record lending last year. The stock index surged 80 percent in 2009.