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Friday, August 21, 2015, 18:11

China stocks plunge more than 4%

By Xinhua

BEIJING - China stocks tumbled on Friday following the release of weak economic data.

The benchmark Shanghai Composite Index slumped 4.27 percent to close at 3507.74 points.

The Shenzhen Component Index dived 5.42 percent to close at 11,902.05. The ChiNext Index, tracking China's Nasdaq-style board of growth enterprises, slumped 6.65 percent to end at 2,341.95.

Companies in public transportation, communication, and highways lost the most.

The shares plunged after the release of Caixin flash China general manufacturing PMI, which retreated to 47.1 in August from 47.8 in July, the lowest point since March 2009.


The Shanghai Composite Index lost 4.2 percent, to 3,507.74 points. For the week, that index tumbled 11.5 percent, the sharpest drop since the week ending July 3, and near the low it hit on July 9 during the height of the recent market rout.

Hong Kong shares fell in tandem. The Hang Seng Index lost 1.5 percent on Friday, and 6.6 percent this week, putting it back near where it was in May 2014 and making it a bear market territory, with a fall of more than 20 percent since April.

The China Securities Regulatory Commission (CSRC) made no mention of this' week's slump during its regularly scheduled press conference after market close on Friday, nor did it take questions on the topic.

However, the CSRC announced on its official social media feed that it is investigating major stakeholders in listed companies for illegally selling off their shares.

According to regulations promulgated during the height of the market collapse in July, Beijing prohibited those holding over 5 percent of any given listed company's shares from selling for 6 months.

Cosmetic investor sentiment was already bearish after an earlier slump on Tuesday, when markets lost over 6 percent due to general malaise over policy direction. Investors remain anxious after a surprise decision on August 11 by the central bank to sharply devalue the yuan.


That was followed by other signs of deepening weakness in the world's second-largest economy, most recently the preliminary Caixin/Markit China Manufacturing Purchasing Managers' Index (PMI) reading for August, which fell from July's reading and disappointed forecasts.

"The sentiment remained relatively bearish for most of the week with the poor economic data and absence of clear short-term positive triggers adding downward pressure to the market," wrote Gerry Alfonso, director at Shenwan Hongyuan Securities Co.

"The soft China Caixin PMI figure caused the market to close on Friday rather poorly."

Investors dumped shares across the board, including companies with investments from government rescue funds, making their share price surges in the past days short-lived.

Money into these stocks backed by the "national team" - institutions enlisted by the government to support the market - are speculative in nature, according to Gui Haoming, analyst at Shenwan Hongyuan Securities.

"Many market participants are totally at a loss, so they can only make speculative bets on such concepts," he said.

Telecoms and tech stocks were among the weakest sectors, while banking outperformed the broader market.

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