China stocks tumble

China's share market tumbled nearly 4 percent to a 12-month closing low on Friday as the biggest stock, PetroChina, dropped for the first time below its price in last October's Shanghai initial public offer.
After leaping more than sixfold in a two-year bull run, the market has been gripped for six months by a downtrend triggered by high inflation, a threatened slowdown of the economy later this year, and heavy supplies of new equity.
The Shanghai Composite Index slid 3.97 percent to end Friday at 3,094.668 points, near its intra-day low of 3,078.174. It lost 11.4 percent this week, its biggest weekly drop since 1996, and is now 49 percent below last October's record peak.
That makes China one of the world's worst performing markets. Since peaking on November 1, MSCI's index of Asia stocks excluding Japan is off 20 percent. The total capitalisation of the Shanghai and Shenzhen exchanges has shrunk by about $1.8 trillion since December to $2.9 trillion.
Panic spread on Friday as PetroChina broke its IPO price of 16.70 yuan. Since the oil giant has the largest weighting in the index, about 16 percent, the break was seen as negative for the whole market, implying institutions were so bearish that they were willing to take losses to exit the stock.
PetroChina closed 5.04 percent lower at 16.02 yuan, after touching a low of 16.00 yuan, pressured by expectations that high global oil prices will cause losses at its refining operations. In recent weeks, PetroChina repeatedly hit but did not break its IPO price, and traders said some institutions appeared to be mounting a support operation for the stock to prevent panic in the market. But on Friday, this support suddenly vanished.
"The action to support PetroChina's price may just have delayed the process of the index finding its real bottom. So the break of the IPO price may be a sign that the index is accelerating towards its floor," said Li Wenhui, analyst at Huatai Securities.
PetroChina's Shanghai-listed A shares have dropped 64 percent since their first day of trade in November, when they more than doubled, causing the company temporarily to eclipse Exxon Mobil as the world's largest firm by market capitalisation.
The shares may have further to fall. Some traders are talking of targets around 15.00 yuan, and the A shares still command a huge premium of over 80 percent to the company's Hong Kong-listed H shares. Losing Shanghai stocks overwhelmed gainers by 823 to 55 on Friday as over 35 Shanghai A shares fell their 10 percent daily limits. Turnover in Shanghai A shares was a thin 54.3 billion yuan ($7.8 billion), showing many investors had fled the market.