The mainland stock market yesterday plunged 5.42 percent to the lowest point in 11 months after slower-than-expected growth in industrial corporate profits.
The benchmark Shanghai Composite Index slid 195.37 points to close at 3,411.49, with 815 out of 911 stocks closing lower. The Shenzhen Component Index fell 2.8 percent to close at 13,111.41, as heavy-weighted real-estate companies performed well because of investors' expectations of an easing of bank credit.
Turnover on the two bourses amounted to 111.6 billion yuan ($15.89 billion), up 7 percent from Wednesday. Market capitalization shrank 1.5 trillion yuan ($214 billion) to 22.24 trillion yuan ($3.16 trillion).
Analysts said that reduced growth in industrial corporate profits sparked investor worries of a further slowdown.
"China's economy is expected to slow down in the next one to two years, which will ease the current supply shortage and draw prices downward," said Gao Shanwen, chief analyst at Essence Securities.
"Growth in corporate earnings is also expected to slow," Gao said, adding that it is hard to set a timeframe.
Industrial corporate profits rose 16.5 percent to 348.2 billion yuan ($49.6 billion) in January and February, while the figure was 36.7 percent in the first 11 months last year, according to the National Bureau of Statistics.
"The profit decline was led by oil refining and coking companies (down 232 percent) and power companies (down 61 percent), as their profits were largely squeezed due to the snow disaster earlier this year and the government's restrictions on price hikes," Gao explained.
Oil and power companies fell sharply yesterday. Shares of PetroChina, the mainland's largest stock in total capitalization, dived 8.31 percent to close at 16.99 yuan ($2.42), approaching its IPO price of 16.7 yuan ($2.37).
Leshan Electric Power plummeted 9.98 percent to close at 12.81 yuan ($1.82).
Shares of China National Coal Group Corp and China Shipping Container Lines (CSCL) closed below their IPO prices yesterday, following Pacific Insurance, which was the first major share to drop under the IPO price at the close on Wednesday.
"Though some stocks have fallen below IPO prices, there are still large price gaps between A shares and Hong Kong-listed H shares," said Wu Feng, an analyst at TX Investment Consulting Co Ltd. The A-share price of CSCL was trading at a 129 percent premium to its H share, and the A share of China National Coal at 33 percent.
"With uncertainty over the credit situation and further government measures, the market is expected to continue to fluctuate in the next few weeks," said Zhu Haibin, an analyst at Essence Securities.
（英语点津 Celene 编辑）
About the broadcaster:
Bernice Chan is a foreign expert at China Daily Website. Originally from Vancouver, Canada, Bernice has written for newspapers and magazines in Hong Kong and most recently worked as a broadcaster for the Canadian Broadcasting Corporation, producing current affairs shows and documentaries.
