Shares sank on Thursday amid rising volume as a wave of selling followed yet another increase in banks' reserve ratio requirement.
The benchmark Shanghai Composite Index, which covers A and B shares, slid 138.98 points, or 2.63 percent, to 5,151.63. The index was down as much as 4.74 percent during the day before bargain-hunting helped it recover in late afternoon trading. The index plunged 2.81 percent, the biggest fall in nearly eight weeks, on Wednesday in reaction to heavy losses on Wall Street and deepening concern over a U.S. recession.
The Shenzhen Component Index fell 441.61 points, or 2.41 percent, to 17,910.39.
Losses led gains by 662 to 176 in Shanghai and 499 to 160 in Shenzhen. Combined turnover expanded to 264.9 billion yuan (36.5 billion U.S. dollars) from 247.4 billion yuan in the previous session.
The People's Bank of China, or central bank, announced after the market closed on Wednesday that the reserve requirement would be lifted by 0.5 percentage point to 15 percent, the highest since 1984.
The move, which will be effective Jan. 25, is the first hike this year after 10 increases last year. The central bank is seeking to curb excess liquidity and overly rapid loan growth.
Although the reserve ratio hike was one of many recent such moves, it brought about almost a sense of panic among Chinese investors, coming in the midst of weak world markets, said Guangfa Huafu Securities. Another broker, Shanghai Shiji Investment Consulting, said that a strong but short-lived technical rebound could follow three consecutive declines.
Oil, steel, nonferrous metals, and property stocks led the fall.
PetroChina, which accounts for about 25 percent of the Shanghai index, fell 2.09 percent to 29.04 yuan, the lowest close since its record high of 48.62 yuan on its debut on Nov. 5. China Petroleum and Chemical Corp. (Sinopec) plunged 6.48 percent to 21.49 yuan.
Baoshan Iron and Steel, China's largest steel producer, slumped 3.79 percent to 17.53 yuan. Another steel giant, Angang Steel, plummeted 7.01 percent to 27.05 yuan.
Yunnan Copper shed 5.93 percent to 60.77 yuan and Yunnan Aluminium plunged 9.09 percent to 25.70 yuan.
Leading property developers fell, too. Shanghai Shimao was down 5.38 percent to 21.47 yuan and China Vanke was down 3.39 percent to 27.61 yuan.
Banks remained weak following the reserve requirement hike. Industrial and Commercial Bank of China dropped 2.53 percent to 7.71 yuan and Bank of China fell 1.67 percent to 6.48 yuan.
Profit taking sunk agricultural and Olympic-related stocks after a recent rally. Beijing Urban and Rural Trade Center fell 7.8 percent to 17.15 yuan and Sichuan New Hope Agribusiness dropped 8.3 percent to 22.88 yuan.
Stocks' tumble came despite strong rebounds in Hong Kong and Tokyo. Hong Kong's benchmark Hang Seng rose 2.72 percent to 25,114.98 and Tokyo's Nikkei 225 index climbed 2.07 percent 13,783.45. Overnight, the Dow Jones Industrial Average slipped 0.28 percent to 12,466.16.
(Xinhua News Agency January 18, 2008)
