China: China's benchmark stock index tumbles 5.4 percent on declines in PetroChina

AP ^ | 03/27/08

[TigerLikesRooster]

China's benchmark stock index tumbles 5.4 percent on declines in PetroChina

AP - 56 minutes ago

SHANGHAI, China - China's benchmark stock index tumbled 5.4 percent Thursday to its lowest level in 11 months, dragged down by dramatic declines in PetroChina and other large cap stocks.

The main Shanghai Composite Index fell 195.36 points to close at 3,411.49 points, its lowest finish since April 9. The benchmark index on the smaller Shenzhen exchange shed 4.2 percent to 1,161.66.

PetroChina, China's biggest oil producer, led the declines, dropping 8.3 percent to 16.99 yuan, slightly above its IPO price of 16.70.

PetroChina has a 20 percent weighting on the Shanghai index, and each 5 percent decline in its stock price shaves 100 points off the index.

Analysts said investors were dumping PetroChina stock, fearing it would follow China Pacific Insurance, whose stock price dropped 7.5 percent Thursday to 25.89 yuan, well below its IPO price of 30.00 yuan.

"With PetroChina dragging down the index and with bearishness spreading, there's no bottom in sight," said Zhou Lin, an analyst with Huatai Securities.

PetroChina has fallen 22.4 percent over the past week alone and is 65.1 percent off its record high of 48.62 yuan.

Thursday's declines follow a smaller drop on Wednesday. Investors remain cautious about large lots of shares coming into the market as lockup periods expire in coming weeks. Analysts say the slide can only be stopped if policy makers in Beijing signal publicly that they are discouraging massive sales by big shareholders.

Analysts said confidence was weakened further Thursday by a lower-than-expected earnings report from the listed unit of China's biggest steel maker by capacity, Baoshan Iron & Steel.

Baoshan dropped 9 percent to 13.06 yuan after announcing its net profit in 2007 fell 2.8 percent to 12.72 billion yuan on higher ore prices.

Disappointment with Baoshan's earnings prompted other blue chips to fall.

China Construction Bank dropped 5.5 percent to 6.57 yuan, Air China dropped 9.1 percent to 15.64 yuan, and China Shenhua Energy dropped 9.8 percent to 40.00 yuan.

The gloomy outlook is fueling speculation that blue chips' first-quarter earnings will almost certainly be below expectations, Southwest Securities analyst Zhang Gang said.

"The markets used to buy on the expectation that the companies' 2008 net profit will grow by 30 percent. This looks a very remote possibility now," Zhang said.

In currency dealings, the dollar ended at 7.0172 yuan on the over-the-counter market, down from Wednesday's close of 7.0448 yuan.

Dealers said they expect the dollar to fall to 7.000 yuan in coming days, hastened by Chinese exporters' rush to convert their dollar-denominated sales revenue into yuan before the end of the month.

[TigerLikesRooster]

Ping!

[Uncle Ike]

Listening to CNBC this morning — completely amazed at how disconnected the markets have become from the “real world”..

If this trend continues, I’d expect the DOW to jump to $20000 on the day that the food riots start in NYC.... ;~)

[familyop]

It would be interesting, if the article revealed more pertinent information about PetroChina. Does PetroChina buy oil from other countries and distribute it in China?

Crude futures are even higher right now.

[TigerLikesRooster]

Did they say Dow would jump to 15,000 soon?

[TigerLikesRooster]

In addition to buying and distributing, they also secure exploration rights and develop oil/gas fields in places like Iran and Africa.

[TigerLikesRooster]

Ping!

[familyop]

Thank you.

[AFPhys]

I have a sneakin’ ‘spicion that we’re just about to see the end of the dollar’s fall.

[grey_whiskers]

Peking is forcing PetroChina to sell oil at a loss.

See here for more details. China is having Jimmy Carter -era lines at the gas pump.

Cheers!

[pie_eater]

There’s a relatively cogent article in last week’s Barrons predicting a possible 18,000 to 20,000 Dow within the next year. Lots of cash sitting on the sidelines waiting to invest, coupled with falling oil prices.

[TigerLikesRooster]

They must count on the Fed to catch all falling knives heading for them. Fed is such a generous institution.

[Mr. Jeeves]

If the price of a house can be afforded only temporarily and only by the use of a smoke & mirrors loan guaranteed to bankrupt the house buyer and guaranteed to fleece the gullible investor that the bank sells the mortgage to and that both the bankrupt house buyer and the fleeced investor want the U.S. taxpayer to bail them out from, that house does not have a true market value of "what the market .... not the U.S. taxpayers... can bear".

The Dow is 30 stocks - lazy journalists may use it as a proxy for the overall health of the economy, but it's entirely possible the index could go higher even during a recession. But the S&P 500 and NASDAQ won't.

[Mr. Jeeves]

If this trend continues, I’d expect the DOW to jump to $20000 on the day that the food riots start in NYC.... ;~)

Dang paste buffer...that's the part of your post I meant to highlight. ;)

[DungeonMaster]

China has a stock market? I thought the government owned everything.

[Always Right]

There’s a relatively cogent article in last week’s Barrons predicting a possible 18,000 to 20,000 Dow within the next year. Lots of cash sitting on the sidelines waiting to invest, coupled with falling oil prices.

That's a bit high, but I think we will see new highs this year, maybe even test 15,000.

[jiggyboy]

Analysts say the slide can only be stopped if policy makers in Beijing signal publicly that they are discouraging massive sales by big shareholders.

Proof that USA-style free-market capitalism is taking hold in China -- Big Money is demanding that the government do something to protect their profits.

[familyop]

"Peking is forcing PetroChina to sell oil at a loss.

See here for more details. China is having Jimmy Carter -era lines at the gas pump.

Cheers!"

Thank you! ...good job!

Well, China still owns over 150,000 of its businesses (well over half), and the PLA can order up production whenever it wants to. But China also has to please its people, or else. That's one of the consequences of communism: choices between terrible internal disobedience and violence or stupid international moves (including wars). So the PLA has to keep the economy firing as long as possible before trouble follows.

[familyop]

"I have a sneakin’ ‘spicion that we’re just about to see the end of the dollar’s fall."

Yes. Some of the biggest bankers are trying to halt the currency transition now. The big oil decision makers have effectively frozen oil prices for the time being. But such manipulations do have consequences.

And BTW, most retail grocery prices just went down a little where I shop (except, for the importer "recession" propaganda, flour and eggs).

And a new steel mill started on our east coast. Say goodbye to the paradigm of the last couple of decades. Asians are now hungry for luxuries and showing a lot of domestic demand (in their own countries). Within a few years, the yuan will be higher than the dollar.