Chinese share prices slid on Monday in response to the government's move over the weekend to raise the reserve requirement ratio for commercial banks by half a percentage point.

 

The benchmark Shanghai Composite Index dropped 2.4 percent, or 127.81 points, to close at 5,187.73 points, after falling to as low as 5,032.58 points in intra-day trading.

 

The Shenzhen Component Index fell 0.55 percent to 17,065.77 points.

 

Combined turnover on the two markets was about 128 billion yuan (US$17.3 billion).

 

The Hushen 300 index, accounting for more than 60 percent of the nation's total stock market value, slumped 1.24 percent, or 62.27 points, to finish at 4,978.25.

 

Prices regained some ground in the afternoon as investors hunted bargains.

 

Analysts said investor confidence was affected after the People's Bank of China, the central bank, raised the bank reserve requirement ratio to a ten-year high of 13.5 percent. Wall Street's decline last week also hurt sentiment.

 

On Friday, the Dow Jones Industrial Average slipped 1.69 percent, or 223.55 points, to 13,042.74 on credit jitters.

 

Investors fear the central bank could raise interest rates further to reduce liquidity and cool the economy, said Li Wenhui, an analyst with Huatai Securities.

 

Wan Bing, an analyst with Guangfa Securities, said equity prices may decline for some time, with no sharp rebound likely in the near future.

 

Last week, the Shanghai Composite Index fell 8 percent to 5,315.54, the biggest weekly loss during the past nine years.

 

Heavyweights and energy and nonferrous metal shares led the market loss on Monday. PetroChina, the nation's largest oil and gas producer, fell 4.53 percent to 36.45 yuan.

 

China Petroleum and Chemical Corporation, Asia's largest oil refiner, dropped 5.05 percent to 22.18 yuan. Aluminum Corporation of China Limited, the nation's largest aluminum producer, plunged 8.82 percent to 34.34 yuan.

 

Banks were mixed after the reserve requirement ratio increase.

 

Ten banks fell, with heavyweights Industrial and Commercial Bank of China falling 2.16 percent to 8.17 yuan and Bank of China declining 1.81 percent to 7.06 yuan.

 

Shanghai Pudong Development Bank was among four banks whose shares rose: it jumped 3.28 percent to 55.44 yuan.

 

The A Share Index on the Shanghai Stock Exchange slid 2.38 percent, or 132.93 points, to 5,446.19, and the B Share Index sank 5.73 percent, or 20.19 points, to 332.24.

 

(Xinhua News Agency November 13, 2007)