Stocks tumble as market liquidity dries
The Shanghai Composite index slumped 1.68 percent, or 39.23 points to 2,291.90 at the close of trading.
The index lost the most in three weeks, erasing its previous three-day gain. Turnover stood at 58.1 billion yuan (US$9.2 billion).
"The global economic slowdown has deepened the European sovereign debt crisis, and rising costs of production factors will drag down China's industrial growth further in the first quarter." Zhu Hongren, chief engineer of the Ministry of Industry and Information Technology, said at a press conference in Beijing today.
Metal producers retreated on expectations of lower future demands. Jiangxi Cooper, China's largest producer of the metal slumped 1.55 percent to 24.8 yuan. Tongling Nonferrous Metals, the second-largest smelter, plunged 1.59 percent to 19.75 yuan. Inner Mongolia Baotou Steel Rare-earth Hi-tech Co tumbled 2.32 percent to 44.55 yuan.
The central bank has suspended the issuance of new bills for a fifth week, and made a repurchase of 26 billion yuan of bills today, according to an announcement by the China Foreign Exchange Trade Center.
Cao Xuefeng, analyst at Huaxi Securities said the move has dispelled market expectations for further reserve requirement ratio cuts.
Huang Yuan, analyst at First Financial, said: "The central bank will repurchase more bills this week. Along with eight new IPOs to be launched, investors are worried about liquidity drain up."
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