By: fcoa on Martedì 27 Febbraio 2007 09:41
China's Stocks Have Biggest Tumble in 10 Years; Banks Plunge
By Zhang Shidong and Yidi Zhao
Feb. 27 (Bloomberg) -- China's stocks tumbled the most in 10 years as some investors judged record gains in key indexes as excessive. Citic Securities Co., the nation's biggest publicly traded brokerage, led declines.
``The market's very sensitive as it's been trading at record levels and some stocks are considered overvalued,'' said Fan Dizhao, who helps manage about $1.8 billion with Guotai Asset Management Co. in Shanghai. ``Investors are nervous about recent rapid gains and aren't convinced further share-price increases can be sustained.''
China Minsheng Banking Corp. led declines by lenders as the central bank raised the reserve ratio this week for the fifth time in eight months, reducing funds available to commercial banks for lending.
The Shanghai and Shenzhen 300 Index, which tracks yuan- denominated A shares listed on China's two exchanges, plunged 250.18 points, or 9.2 percent, to 2457.49 at the close. The measure, which jumped 13 percent in the past six sessions, closed at a record 2707.68 yesterday.
The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, plunged 8.8 percent to 2771.79. Today's tumble was the biggest since Feb. 18, 1997. The Shenzhen Composite Index, which covers the smaller one, dropped 8.5 percent to 709.81. The measure has surged 29 percent this year.
Today's rout wiped out $107.8 billion from a stock market that doubled in the past year. The benchmark has gained or fallen at least 3 percent on 10 different days this year.
`Healthy Correction'
Stocks surged last year after a government plan to make more than $200 billion of state-owned stock tradable revived investor demand and paved the way for sales by some of the nation's biggest companies. The economy, which in 2005 overtook the U.K. as the world's fourth biggest, averaged annual growth of 9.6 percent in the past five years.
``China has gone up so much,'' said Winson Fong, who manages $2 billion as chief investment officer at SG Asset Management in Singapore. ``It's not a bad thing to have a healthy correction as it provides an opportunity to correct over-valuations and allow people who have missed out to start buying.''