Chinese shares slid 2 percent to a three-month closing low on Tuesday, led by further declines in index heavyweight PetroChina and other large-cap stocks after subprime worries rattled global stock markets.
The benchmark Shanghai Composite Index shed 97.738 points to 4,861.111 after hitting a day low of 4,857.038 points aching its 120-day moving average for the first time in nearly two years.
The fall below the moving average, now at 4,882.515, could spark more selling later this week, analysts said. PetroChina, which has an index weighting of about 23 percent, tumbled 3.58 percent to 32.55 yuan, after sliding to 32.52 yuan - its lowest level since its listing on November 5. Several analysts said the stock remained overvalued.
Turnover in the Shanghai A-share market was a thin 52.2 billion yuan ($7.07 billion), down from Monday's 59.4 billion yuan. Losing Shanghai stocks outnumbered gainers by 539 to 294. The Shanghai index has dropped 21 percent from its all-time high set on October 16, driven by a flood of new share sales, a halt in the launch of new mutual funds, worries about monetary tightening and increased volatility in the Hong Kong stock market.
Daily opening of new stock accounts had fallen to 139,353 last Thursday from nearly half of a million three month ago, while that of new mutual fund accounts dropped to 19,294 last Friday from nearly 35,000 a week earlier, official data showed.
Chinese brokerage Orient Securities said in a report that it expected the Shanghai Composite Index would move between 4,500 points and 6,500 points next year on expectations of a slowdown in the earnings growth of listed companies.
Shenyin Wanguo Securities, one of China's top brokerages, said on Tuesday that the CSI300 index, which tracks 300 largest A shares on the Shanghai and Shenzhen stock exchanges, would fluctuate between 4,500 points and 7,000 points in 2008.
The CSI300 index, used by many institutional investors as a benchmark, fell 1.85 percent to 4,711.152 points on Tuesday. Large-cap stocks, particularly financials and property plays, bore the brunt of heavy selling on Tuesday.
No 2 Chinese insurer Ping An Insurance slid 4.68 percent to 100.98 yuan. China Vanke, the largest developer listed in mainland China, fell 4.01 percent to 30.20 yuan.
Refining giant Sinopec tumbled 4.35 percent to 20.91 yuan. Hafei Aviation Industry jumped its 10 percent daily limit to 23.24 yuan after saying it would set up a parts manufacturing joint venture with Airbus in north-eastern China. Sichuan Chuantou Energy also climbed 10 percent to 21.73 yuan after saying it would buy assets from its parent in a deal worth up to 400 million yuan.
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