AFP, Shanghai :
Chinese shares plummeted more than seven percent on Friday as margin traders closed positions and concerns over market overvaluation mounted, dealers said.
The benchmark Shanghai Composite Index closed down 7.40 percent, or 334.91 points, to 4,192.87 on turnover of 787.8 billion yuan ($128.9 billion). The Shanghai market lost 6.37 percent over the week.
The Shenzhen Composite Index, which tracks stocks on China’s second exchange, plunged 7.87 percent, or 213.75 points, to 2,502.96 on turnover of 555.1 billion yuan. It dropped 8.72 percent for the week.
Chinese shares have more than doubled in value over the past year, partly driven by margin traders flooding the markets with borrowed money.
But since they peaked two weeks ago Shanghai has fallen 18.8 percent and Shenzhen is down 20.3 percent, putting that exchange into bear territory.
Shanghai corrected sharply last week as investors booked profits, dropping 13.32 percent, and analysts said Friday more leveraged investors were closing their positions.
“Margin traders, especially over-the-counter leveraged traders, reduced or closed their positions on the market, which is the main reason for the plunge,” Zhang Gang, an analyst from Central China Securities told AFP.
Outstanding margin debt in Shanghai dropped for a fourth straight day on Thursday to 1.42 trillion yuan ($228 million), Bloomberg News reported.
“China’s stock market is starting to show some cracks as more investors are questioning the sustainability of valuations,” Jonathan Ravelas, a chief market strategist at BDO Unibank, told Bloomberg News.
China’s central bank injected liquidity into the banking system on Thursday after halting open market operations for several weeks.
Highway stocks led the plunges in Shanghai. Sichuan Expressway slumped by its daily 10 percent limit to 6.98 yuan, and Jiangsu Expressway tumbled 9.77 percent to 8.96 yuan.
Communications shares tumbled in Shenzhen. Tongding Interconnection Information plunged by its daily 10 percent limit to 19.31 yuan, and Zhongxing Telecommunication Equipment fell by its daily 10 percent limit to 23.62 yuan.
Chinese shares plummeted more than seven percent on Friday as margin traders closed positions and concerns over market overvaluation mounted, dealers said.
The benchmark Shanghai Composite Index closed down 7.40 percent, or 334.91 points, to 4,192.87 on turnover of 787.8 billion yuan ($128.9 billion). The Shanghai market lost 6.37 percent over the week.
The Shenzhen Composite Index, which tracks stocks on China’s second exchange, plunged 7.87 percent, or 213.75 points, to 2,502.96 on turnover of 555.1 billion yuan. It dropped 8.72 percent for the week.
Chinese shares have more than doubled in value over the past year, partly driven by margin traders flooding the markets with borrowed money.
But since they peaked two weeks ago Shanghai has fallen 18.8 percent and Shenzhen is down 20.3 percent, putting that exchange into bear territory.
Shanghai corrected sharply last week as investors booked profits, dropping 13.32 percent, and analysts said Friday more leveraged investors were closing their positions.
“Margin traders, especially over-the-counter leveraged traders, reduced or closed their positions on the market, which is the main reason for the plunge,” Zhang Gang, an analyst from Central China Securities told AFP.
Outstanding margin debt in Shanghai dropped for a fourth straight day on Thursday to 1.42 trillion yuan ($228 million), Bloomberg News reported.
“China’s stock market is starting to show some cracks as more investors are questioning the sustainability of valuations,” Jonathan Ravelas, a chief market strategist at BDO Unibank, told Bloomberg News.
China’s central bank injected liquidity into the banking system on Thursday after halting open market operations for several weeks.
Highway stocks led the plunges in Shanghai. Sichuan Expressway slumped by its daily 10 percent limit to 6.98 yuan, and Jiangsu Expressway tumbled 9.77 percent to 8.96 yuan.
Communications shares tumbled in Shenzhen. Tongding Interconnection Information plunged by its daily 10 percent limit to 19.31 yuan, and Zhongxing Telecommunication Equipment fell by its daily 10 percent limit to 23.62 yuan.
