Chinese stocks slid 4.55 percent on Tuesday to a three-week closing low, led by financial and property shares after the central bank announced a rate cut that was much smaller than the market had been anticipating. The Shanghai Composite Index closed at 1,897.225 points, extending a 1.52 percent loss on Monday that had snapped a five-day rising streak.
Looming expiries this week of lock-up periods for a large volume of shares are also weighing on the market. Losing Shanghai A shares outnumbered gainers by 895 to 32, with more than 30 Shanghai A shares plunging by their 10 percent daily limit. Turnover in Shanghai A shares rose to 66.8 billion yuan ($9.8 billion) from Monday's 60.3 billion yuan.
After the market closed on Monday, China's central bank announced a cut in banks' benchmark lending and deposit rates by 0.27 percentage point, the fifth cut since mid-September. Analysts said the much smaller-than-expected rate cut was a disappointment for the market, which was already struggling with weak sentiment.
Rate-sensitive sectors such as banks were weak. Industrial & Commercial Bank of China, the country's largest bank, slipped 2.65 percent to 3.68 yuan after dropping 1.05 percent on Monday. Industrial Bank lost 5.06 percent to 15.56 yuan. China Vanke, the country's leading listed property developer, fell 4.90 percent to 6.98 yuan after dropping 4.92 percent on Monday.
The index broke below its 60-day moving average, now at 1,946 points, a chart line that analysts said had provided solid support in recent weeks. "The technical sign is not good. The market is unlikely to rally strongly in the rest of the days in 2008," said Zhang Yanbing, analyst at Zheshang Securities.
"Some investors viewed the rate cut as the last positive news and the last chance to take profits this year. The release of locked-up shares is still weighing on the market," said Li Wenhui, analyst at Huatai Securities. He added that the index faced profit taking after rising to 2,000 points and it might slip to test 1,900 points in the next few days.
China Pacific Insurance Group, the country's third-largest insurer, sagged 7.41 percent to 10.87 yuan, adding to the previous day's 5.09 percent drop after saying around 1.58 billion of its shares would emerge from a lock-up period and become tradeable on Thursday.
Haitong Securities tumbled 7.97 percent to 7.74 yuan, with 160 milllion lock-up shares becoming tradable on Monday. Local media reported 2.07 billion of Haitong's lock-up shares would become freely tradable through the end of 2008. Guangzhou Steel tumbled 10 percent to 4.01 yuan after saying its second biggest shareholder had sold 10.3 million shares.
Sinopec, China's biggest oil refiner, dropped 4.30 percent to 7.35 after losing 3.27 percent on Monday while PetroChina was off 4.30 percent at 10.45 yuan after slipping 1.44 percent on Monday, following news last week of a fuel price cut and tax hike that analysts expect will hurt refiners' margins in the short term.
ChangJiang Shipping Phoenix raced up 10 percent to 5.36 yuan while Nanjing Tanker advanced 9.52 percent to 5.06 yuan, rallying for a second day after news that a merger between their parent companies, China Yangtze Transportation (Group), and Sinotrans had been approved by the State Council, China's cabinet.
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