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3rd Ld-Writethru-China Focus: Drastic fluctuations on Chinese stock market

Xinhua, June 29, 2015 Adjust font size:

China's stock market saw sharp fluctuations on Monday despite unexpected rate cuts from the central bank on Sunday.

The major Shanghai Composite index closed 3.34 percent lower at 4,053.03 points. The Shenzhen Component Index lost 5.78 percent to close at 13,566.27 points.

The ChiNext Index, tracking China's Nasdaq-style board of growth enterprises, slumped by 7.91 percent to end at 2,689.76 points.

During Monday's trading, losers outnumbered winners by 829 to 110 in Shanghai, and 1,312 to 88 in Shenzhen. More than 1,500 stocks fell by the daily limit of 10 percent.

Stocks relating to transport equipment, medical care, information security, e-commerce, smart home appliances and smart power grids led the losses. Shares on Internet finance, domestic software and environmental protection also tumbled by more than 8 percent.

The People's Bank of China (PBOC) announced on Saturday it would cut both the requirement reserve ratio (RRR), the amount of reserves banks are required to hold, and key interest rates to support the real economy and promote restructuring. The stock market showed no signs of relief, with the major index experiencing a roller coaster 10.07 percent volatility on Monday.

The benchmark Shanghai index has shed 21.73 percent over the course of just two weeks. It nosedived 7.4 percent last Friday, the sharpest daily drop since June 10, 2008.

The Chinese stock market has seen impressive rebound since the second half of 2014 after being stuck in the doldrums for about six years.

Shanghai closed at fresh seven-year highs for several consecutive days in May, before another nosedive on record turnover on May 28.

On June 5, the major Shanghai index surpassed the 5,000-point mark for the first time in over seven years, jumping to 5,023.1 points.

June 12 saw the index hitting its peak at 5,178.19 points, after which the market began to the current downswing.

Analysts from Tianxin Investment partially attributed the fall to a strict ban by China Securities Regulatory Commission (CSRC) on illicit loans for stock purchases and margin trading outside the brokerage system.

Also, banks settle their account balance and complete payments to each other in the middle of the year, which results in a shortage of funds, analysts said.

Some analysts expect the stock market rise again in the coming months, saying the central bank's latest action surprised the market but will eventually raise market sentiment. Endi