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Monday, September 14, 2015, 16:04

China stocks plunge

By Xinhua

BEIJING - Chinese shares continued to head south on Monday, with the benchmark Shanghai Composite Index dipping 2.67 percent to end at 3,114.80 points.

The Shenzhen Component Index lost 6.55 percent to close at 9,778.23 points. The ChiNext Index, which tracks China's NASDAQ-style board of growth enterprises, lost 7.49 percent to close at 1,906.21 points.

The benchmark Shanghai Composite Index dived more than 3 percent by noon, shedding 3.20% to cose at 3097.71 midday.

The Shenzhen Component Index tumbled 4.49% to close at 9994.34 midday.

Chinese stocks had opened higher, however.

The Shanghai Composite Index was up 0.65 percent at 3,221.17 points. The Shenzhen Component Index opened 0.52 percent higher at 10,517.68 points. The ChiNext Index, tracking China's NASDAQ-style board of growth enterprises, opened 0.37 percent higher at 2,068.20 points.

The stocks meandered despite economic indicators released on Sunday showing signs of the economy stabilizing.

Retail sales remained robust in August, posting a growth of 10.8 percent, up from 10.5 percent in July. Factory output in August grew 6.1 percent, up from the 6-percent rise in July.

Weak readings in other key indicators, however, mean China's economy still faces huge downward pressure.

In the first eight months, fixed asset investment grew 10.9 percent year on year, retreating from the 11.2-percent growth registered in the Jan-July period.

Property investment growth continued to slow in the first eight months, indicating caution from builders and challenges facing the industry.

The weak data led analysts to expect further monetary easing by authorities following five interest rate cuts since November. The reserve requirement ratio, the money banks are required to park to cushion risks, has been cut four times.

"We expect one more interest cut in the remainder of 2015, and two more 50 basis points (bps) RRR cuts," China International Capital Corporation Limited (CICC), China's biggest investment bank, said in a research note.

On the fiscal front, CICC expects an increase of government investment, mainly through infrastructure projects, to mitigate the downside risks.

On Sept. 7 and 8, China approved eight infrastructure projects worth 147 billion yuan (US$23 billion).

The country has lowered the capital ratio requirement of infrastructure investment projects, with the minimum requirement for ports, waterways and airports cut from 30 percent to 25 percent; that for railway, highway and urban rail transit revised down from 25 percent to 20 percent.

"While cyclical management policies may be effective in mitigating slowing growth momentum in the short term, only market-oriented reforms, including reforms of the fiscal regime and the SOE model, would materially and sustainably boost investment returns and investment growth in the long run," CICC said.

China on Sunday issued a guideline to deepen reforms of state-owned enterprises (SOEs).

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