BEIJING: China’s stocks headed for their steepest weekly loss since February 2009 as initial public offerings drained cash from the market and investors speculated the recent gains have gone too far.
The Shanghai Composite Index tumbled 3.7 percent at the close, taking its declines for the week to 7.4 percent. Analysts are increasingly warning the stock market is in a bubble that will burst after the gauge more than doubled in the past 12 months to reach its highest levels in seven years. IPOs this week will lure about 6.7 trillion yuan ($1.1 trillion) of bids, according to a Bloomberg survey of forecasters.
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“Stocks have risen too much and valuations have reached critical levels,” Northeast Securities analyst Shen Zhengyang said by phone. “Anything that’s slightly negative can impact the market.”
The ChiNext index of smaller companies sank 6.3 percent, paring its gain this year to 138 percent. PetroChina Co., the nation’s biggest company by market capitalization, slumped to its lowest level in a month. Liquor maker Kweichow Moutai Co. tumbled 4.4 percent.
David Woo, the head of global rates and currencies research at Bank of America Corp., said the bubble in China’s stocks rivals the dot-com boom of the late 1990s and its eventual collapse will have consequences for markets around the world. A market crash may come within six months, Bocom International Holdings Co. said Tuesday, citing an analysis of global bubbles over 800 years.
