Feb 27, 2007 3:44 am US/Pacific
Chinese Stock Index Sees Biggest Drop Since 1997
SHANGHAI, China (AP) ―
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The Shanghai Composite Index tumbled 8.8 percent to close at 2.771.79.
CBS
Shanghai's benchmark stock index plunged nearly 9 percent on Tuesday, its biggest drop in more than 10 years, as investors unloaded stocks to lock in profits after recent gains.
The Shanghai Composite Index tumbled 8.8 percent to close at 2.771.79, its largest single-day decline since it fell 9.4 percent on Feb. 18, 1997, just after the death of Communist Party elder Deng Xiaoping.
The Shanghai index had gained 1.4 percent on Monday to 3,040.60, extending a spate of record high closes.
On China's smaller exchange, the Shenzhen Composite Index plummeted 8.54 percent Tuesday to 709.81.
Chinese share prices doubled last year as investors piled into the market following the completion of shareholding reforms that helped to reduce worries over a potential flood of shares entering the market.
But the markets have become increasingly volatile.
Market heavyweights plunged Tuesday on heavy selling by institutional investors, which in turn spooked retail investors.
"The most important reason for today's decline was pressure for profit-taking," said Peng Yunliang, a senior analyst at Shanghai Securities.
"People viewed 3,000 as a psychological benchmark. It's understandable they might want to pull back after the market hit that peak," Peng said.
Large-cap Baoshan Iron & Steel hit the 10 percent downside limit at 9.03 yuan, CITIC Securities fell 9.7 percent to 36.21 and China Life Insurance declined 9 percent to 33.89 yuan.
Airline shares were battered after light, sweet crude for April delivery gained a cent to US$61.40 a barrel, a two-month high, on the New York Mercantile Exchange.
Air China slid 10 percent to 6.79 yuan and China Southern Airlines lost 5 percent to 5.81 yuan.
China still limits foreigners' purchases of the yuan-denominated stocks that make up the biggest share of the markets, though that is gradually changing as regulators allow increasing participation by so-called qualified foreign institutional investors.
(© 2007 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)
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