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China Stocks Plunge to 13-Month Low Amid Capital Outflow Concern

China Stocks Plunge to 13-Month Low Amid Capital Outflow Concern
photo: afp

China's stocks tumbled to the lowest levels in 13 months amid concern capital outflows will accelerate as the economy slows, Bloomberg reported.

The Shanghai Composite Index plunged 6.4% to 2,749.79 at the close. All industry groups slumped, ranging from commodity companies to new-economy shares such as technology, according to Bloomberg.

Some of the nation's most accurate forecasters said the stock index may not bottom until it falls to the 2,500 level.

"It's an issue about confidence and there's no confidence in the market now," said Wu Kan, a fund manager at JK Life Insurance Co. in Shanghai.

Stocks dropped even as the People's Bank of China injected 440 billion yuan ($67 billion) into the financial system using reverse-repurchase agreements, the most in three years. Policy makers are trying to keep borrowing costs from rising as they contend with the slowest economic growth in a quarter century, according to the report.

China's gross domestic product growth is seen slowing further to 6.5% this year, from last year's 6.9%. Outflows jumped in December, with the estimated 2015 total reaching a record $1 trillion, more than seven times higher than the whole of 2014 based on Bloomberg Intelligence data dating back to 2006.

"Capital outflows and demand for cash before Lunar New Year may weigh on the stock market in spite of recent massive fund injection from the PBOC," said Huang Cendong, a Shanghai-based analyst at Sinolink Securities Co.

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