In what analysts described as a crucial technical adjustment, the benchmark Shanghai Composite Index yesterday tumbled 280.71 points, or 4.8 percent, the biggest one-day drop since July 5, to close at 5562.39.

It was an across-the-board slide, with losing stocks outnumbering the gainers by 802 to 44. Turnover on the Shanghai bourse totaled 121 billion yuan, up 18 percent from the previous day.

The plunge brought the indicator 9.17 percent below the record high of 6124.04 the index touched on October 16.

The smaller Shenzhen Component Index yesterday fell 586.58 points, or 3.13 percent, to close at 18175.31.

Analysts said the latest stock price adjustment after the massive run-up in the weeks before the index breached the 6000 level was triggered by a combination of factors, including heightened concern about possible tightening measures and the withdrawal of funds from the market by many small investors to subscribe for the 37 billion yuan PetroChina initial public offering.

Strong government measures to combat inflation and excessive investment, including interest rate hikes and credit tightening, could have an indirect impact on stock investment, analysts said.

Figures released yesterday by the National Bureau of Statistics showed China's gross domestic product for the first three quarters totaled 16.6 trillion yuan, up 11.5 percent year-on-year. The consumer price index in the same period rose 4.1 percent.

"Although concerns about rising inflation and excessive growth have eased somewhat, the huge supply of liquidity in the financial market is still seen to be exerting strong pressure on inflation and investments," said Shen Minggao, a senior economist at Citigroup in Beijing.

Jason Chang, an economist at Standard Chartered Bank in Shanghai, said he expected further tightening measures in the fourth quarter. "We expect at least one more interest rate hike this year," Chang said.

"Many short-term investors have obviously decided to stay on the sidelines after booking profit," said Zhao Xinge, a professor of finance at the China Europe Industrial and Business School.

Wu Gang, an analyst at Orient Securities, said the huge public offering by PetroChina is expected to siphon off a considerable amount of money from the market.

"A chunk of investment funds has gone into the subscription of PetroChina shares," Wu said. "Don't expect the market to stage any significant rebound before the subscription process is over next week."

(China Daily October 26, 2007)