BEIJING: China’s stocks fell, sending the benchmark index toward its steepest weekly loss since 2008, amid concern the government will clamp down on margin trading and valuations are excessive after a world-beating rally over the past year.
The Shanghai Composite Index dropped 1.5 percent to 4,712.15 at 9:33 a.m., extending this week’s slump to 8.7 percent. Losses were led by technology companies and power producers. Leshi Internet Information & Technology (Beijing) Co. and Wangsu Science & Technology Co. decreased more than 5 percent. SDIC Power Holdings Co. declined 4 percent.
The Shanghai gauge dropped as analysts warned the stock market is in a bubble that will burst after it reached its highest levels in seven years and the 21st Century Business Herald reported the securities regulator is working on margin-trading risk management rules for securities firms. Equities have also been weighed down by new share offerings that have lured an estimated $1.1 trillion in bids.
“The correction is mainly triggered by concern about high valuations of smaller companies and the regulator’s crackdown on margin debt,” said Zhang Haitong, chief strategist at Jinkuang Investment Management in Shanghai. “We may be close to the end of the correction. We may see cuts in interest rates or reserve requirement ratios again as the economy is still sluggish.”
