China Stocks Cap Wild Week With Two-Day Drop as PetroChina Falls

29 May 2015 | Author: | No comments yet »

China Stocks Cap Wild Week With Two-Day Drop as PetroChina Falls.

Emerging-market stocks headed for the largest monthly drop this year as industrial companies tumbled and investors weighed the timing of a U.S. interest-rate increase. Chinese stocks capped a volatile week of trading with a second day of losses amid concern that nation’s world-beating rally has gone too far, too fast.TOKYO — Chinese share markets extended a bruising sell-off on Friday after the previous day’s plunge, while the dollar took a breather from a sharp run up this week.

China’s main stock index swung wildly on Friday and analysts say the volatility will continue since the market is being driven by retail investor sentiment and not earnings or economic fundamentals. Evergrande Real Estate Group Ltd., China’s third-biggest developer by assets, sank 27 percent in Hong Kong after raising HK$4.6 billion ($593 million) below a marketed price range. Jiangsu Broadcasting Cable Information Network Corp. rose by the 10 percent daily limit, taking gains since its initial public offering on April 27 to more than 1,000 percent. Some investors attributed Friday’s down and up behaviour to superstition; a number of market blogs noted the Shanghai index had declined sharply on the very same day seven years ago – in light of which investors were inclined to sell.

The Shanghai Composite Index lost 0.2 percent to 4,611.75 at the close, after swinging between gains of as much as 1.7 percent and losses of 4.1 percent. Such a huge injection of money has made the Shanghai and Shenzhen markets the world’s most liquid, as the value of trading surged through 2 trillion yuan every day this week. The gauge tumbled 6.5 percent on Thursday after brokerages tightened lending restrictions and the central bank drained cash from the financial system, while the gauge’s 10-day volatility index climbed to the highest level since January. “The market is likely going to experience massive volatility,” said Gerry Alfonso, a Shanghai-based director at Shenwan Hongyuan Group Co. “People are getting nervous and having some very short time frames for investment. With valuations divorced from economic fundamentals, the heightened volatility we have seen is likely to continue.” European shares dropped overnight, with Germany’s DAX, France’s CAC and Greek stocks falling, while periphery eurozone bond yields rose.

The gauge has slumped 3.7 percent this month as more positive U.S. data boosted the odds for the Federal Reserve to raise interest rates soon, dimming the appeal of riskier assets. Thursday’s rout ended a seven-day, 15 percent surge for the gauge that saw it almost crossing with the 5,000 level for the first time in eight years. The trading is being dominated by retail investors, many of whom believe the current rally is being encouraged by the central government to compensate for the weak property market. “This boom has been created, led and guided by the government so it is unstoppable,” said Zhang Qinghai, a retired tour guide and close follower of the market. The index is still up 126 percent over the past year, the biggest advance among major global benchmark indexes tracked by Bloomberg, and added 3.8 percent during May. The greenback was knocked off the peak as Japanese government officials used stronger language to describe recent moves, with Finance Minister Taro Aso saying the yen’s recent drop had been “rough”.

The U.S. updates first-quarter growth data Friday. “What has surprised recently is the stronger set of economic data that we have received from the U.S., which means the Fed can increase rates soon,” said Mixo Das, a Singapore-based equity strategist at Nomura Holdings Inc. Evergrande slid after the company raised HK$4.6 billion net proceeds from a sale of 820 million shares at HK$5.67 each, according to a filing to the stock exchange Friday. Evergrande plunged the most on record after being forced to cut the price of a share sale that analysts said will do little to reduce the company’s indebtedness.

The use of borrowed money is exaggerating market declines, and losing days on the Shanghai exchange this month have been deeper than at any other time since 2009. Philippine shares rose 1 percent after UBS Group AG said some shares offered a buying opportunity following a six-day slump for the nation’s equity gauge.

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