China Market May Extend Losses

(RTTNews) - The China stock market has finished lower now in three straight sessions, shedding more than 140 points or 7.5 percent in the process. Now the Shanghai Composite Index is tipped to continue that downward trend when it opens on Wednesday - possibly testing the key support level of 2,100 points.

The global forecast points to another sharply lower opening for the Asian markets, although the modest rebound experienced later in the session by some of the bourses on Tuesday may not materialize this time around. A grim economic outlook from the Fed chairman sent the U.S. markets into another tailspin, while uninspired corporate earnings from the financial sector added to the sharply negative sentiment.

The SCI finished modestly lower on Tuesday after a sharply lower opening of more than 3 percent, but it recovered on positive sentiment after the Reserve Bank of Australia slashed interest rates by 100 basis points in the middle of the day. While brokerages remained weak, the oversold financial stocks keyed the rebound and the property and airline sectors also enjoyed a modest recovery.

For the day, the index lost 15.90 points or 0.73 percent to close at 2,157.84 after trading between 2,072.90 and 2,183.00 on turnover of 47.2 billion yuan. The Shanghai A-share index fell 0.73 percent to finish 2,266.10 points, while the Shenzhen A-share index was down 0.83 percent to end at 615.61.

Among the gainers, Industrial and Commercial Bank of China rose 2.2 percent, while Bank of China was up 0.6 percent, China Construction Bank gained 0.7 percent, Poly Real Estate was up 6.2 percent, China Vanke rose 4.78 percent, Poly Real Estate surged 6.18 percent, China Petroleum & Chemical Corp (Sinopec) rose 1.80 percent, China Eastern Airlines gained 6.42 percent, Air China added 3.39 percent and China Southern Airlines jumped 6.23 percent.

Finishing lower, Citic Securities and Haitong Securities both fell by the daily limit of 10 percent, while China Merchants Bank was down 1.70 percent, Ping An Insurance (GROUP | Quote | Chart | News | PowerRating) Co of China fell 4.37 percent, Aluminum Corp of China (Chalco) slid 3.37 percent, China Shenhua Energy shed 6.25 percent, Baoshan Iron & Steel fell 3.32 percent and PetroChina edged down 0.16 percent.

The news from Wall Street continues to be bad as stocks turned in another dismal performance on Tuesday amid lingering concerns about the health of the economy, adding to the steep losses posted in the previous session. While the Federal Reserve announced a measure to buy up massive amounts of commercial paper, investors remained skeptical that it would help inject liquidity into the markets.

Stocks saw initial strength after the Federal Reserve said that it would step into the commercial paper market in order to provide enough liquidity to help corporations properly manage their working capital, announcing the creation of a Commercial Paper Funding Facility. The facility will purchase three-month unsecured and asset-backed commercial paper directly from eligible issuers, providing what it calls a "liquidity backstop." Following the $700-billion financial relief plan aimed at easing pressure on financial institutions that Congress passed last week, the Commercial Paper Funding Facility will impact a wider variety of companies.

Federal Reserve Chairman Ben Bernanke also hinted Tuesday that the central bank might look to cut interest rates in the near future, a move that many experts have been pushing for in recent days to help protect the overall economy from the turmoil in the financial markets. In remarks to a business economics association, the Fed chief highlighted recent evidence that shows a growing threat of a further downturn in the economy and noted an improvement in the inflation outlook lately.

In other news, Bank of America (BAC | Quote | Chart | News | PowerRating) reported a 68 percent decline in its quarterly profit and slashed its dividend, sending financials lower. Later in the day, a rumor that Japan's Mitsubishi UFJ was pulling out of a deal to acquire a stake in Morgan Stanley (MS | Quote | Chart | News | PowerRating) added to the decline. While Morgan Stanly refuted the rumor and said that the deal would close on time, the stock still ended the session down 24.9 percent.

The major averages saw additional selling pressure in late day trading, ending the day at or near their worst intraday levels. The Dow and the S&P 500 set five-year closing lows, while the Nasdaq set a four-year closing low. The Dow closed down 508.39 points or 5.1 percent at 9,447.11, the Nasdaq closed down 108.08 points or 5.8 percent at 1,754.88 and the S&P 500 closed down 60.66 points or 5.7 percent at 996.23.

In economic news, China's outstanding foreign debt was $427.43 billion through June, the State Administration of Foreign Exchange said on Tuesday, 14.4 percent higher than the second half of 2007, excluding the foreign debt of Hong Kong, Macao and Taiwan. China newly borrowed 19.51 billion U.S. dollars of medium- and long-term foreign debt in the first half, up 26.91 percent from the same period last year. The nation paid back $8.77 billion of principal on medium- and long-term debt in the first six months, down 20.28 percent on year.

In corporate news, property developer Vanke saw real estate sales in September rise from the previous month but fell from a year earlier, the company said on Tuesday. The company sold 532,000 square meters in September, up 12.2 percent from August but down 27.6 percent on year. In value terms, sales rose 5.7 percent from the previous month to 4.3 billion yuan but fell 37.9 percent on year. Through the first nine months of this year, sales fell 8.9 percent on year in terms of area to 4.02 million square meters, while they dropped 3.2 percent in value terms to 35.6 billion yuan.

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