Chinese stocks tumbled on Thursday in response to a government warning against overheating of the market and higher-than-expected inflation data. The benchmark Shanghai stock index ended down 3.96 percent at 2,857.365 points, less than four points off its intra-day low, in its biggest drop since last July. Losers outnumbered gainers by 748 to 99.
Turnover in Shanghai A shares was a very heavy 92.0 billion yuan ($11.8 billion) against 96.5 billion on Wednesday. The commissioner of the National Bureau of Statistics, Xie Fuzhan, warned investors to remember risks in the market. Though his remarks were mild, they were the first explicit warning by a top economic official about the bull run since it began last May.
In addition, the China Banking Regulatory Commission told banks to prevent personal loans from flowing into stocks. Such investment is technically illegal, but previously the ban was not strictly enforced.
Analysts said the amount of money that could be blocked from the market as a result was not large compared to other funds that have been pouring into equities. But the commission's order suggested authorities might take further steps to cool stocks.
Technically, the index is showing some signs of turning down - 14-day momentum has been trending down throughout this month, even as the index has hit new all-time highs - but it has important support around its 14-day moving average, now at 2,819, which it has held since mid-August.
China Life tumbled 6.97 percent to 40.84 yuan. Large cap banks were weak with Industrial & Commercial Bank of China down 4.52 percent at 5.28 yuan. But Minsheng Bank rose 1.21 percent to 11.67 yuan. Baoshan Iron & Steel Co was down 5.85 percent at 9.49 yuan.
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