Rate hike worries drag down index
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Worries about a possible interest rate hike over the upcoming long weekend holiday weighed on the Shanghai market yesterday, dragging its key index down for a fifth day, capping the longest stretch of losses this year.
The Shanghai Composite Index fell 1.3 percent to 2,887.04, the lowest close since February 25.
Blue chips, such as cement and property counters, were the weakest performers as investors worried that the government may be inclined to raise the interest rate with a three-day holiday approaching while more tightening measures may be unveiled to further curb property prices.
Anhui Conch Cement Co, China's second-largest cement producer by output capacity, dived 6 percent, the biggest drop since November 17, to 37.01 yuan (US$5.68).
The property sub-index fell 1.4 percent with Poly Real Estate, China's second-largest developer by market value, losing 2.8 percent to 12.91 yuan.
"There is panic selling in the market right now as investors feel that all the bad news is coming out," Liu Kan, an analyst with Galaxy Securities Co, said. "People firstly are worried the economy may see a slower growth as tightening measures start to take effect amid rumors of an interest rate hike on May 2, the last day of the holiday."
Stricter damping down policies are also likely for the real estate industry as the country's latest move of imposing property tax on extra housing purchases has proved ineffective in bringing down prices since it came into effect three months ago.
Caution and panic selling were even more evident for the Shanghai B share market, which continued to tumble for a fifth straight day. The gauge tracking the US dollar-denominated B shares fell 2.8 percent, on speculation China would impose a capital gains levy on the foreign currency-denominated stocks under a trial program, Shanghai Securities News reported.
