After reporting lower profits, China’s stocks fell the most in the last three weeks. A major blow came from the reports that a significant number of industrial companies are reporting slower profit growth. On the other hand, the government ordered a review of state borrowings as it is concerned about potential bad debts which may damage the national economy.
The worst affected is PetroChina Co. as it declined the most in two weeks. It is the nation’s biggest energy company and often the determiner of wellbeing of the stock market. Like PetroChina Co. the stocks for Industrial Bank Co. and Huaxia Bank Co. slumped at least 2 percent. Even Anhui Conch Cement Co. plunged 6.3 percent.
Thus, from energy companies to finance to material producers, stocks for all went down. The People’s Daily reported that the Shanghai Composite Index (SHCOMP) fell 1.7 percent to 1,976.31 at the closing of trade. The newspaper also reported that The State Council audit order is aimed to provide a solution to the bad loans.
Apprehensions are out that this governmental audit order may bring concerns to investors that local governments may have amassed a huge amount of debt. Though it may not have a massive impact, it will definitely discourage investment and government-led infrastructure construction. Stock market analysts also opine that industrial companies’ profit numbers are pretty bad in China.
What Is Happening to Chinese Stocks?
When the global economy was reeling under recession, China’s growth helped it and set an example that was even appreciated by the renowned economists and market leaders. VC George Soros and Nobel laureate Joseph Stieglitz, all appreciated China for its efficiency, now, when the world seems recovering from the severe recession, the fact that Chinese stocks are not faring well is a major concern.
In fact, China’s stock market has lost more money for investors than any other in the world as the Shanghai Composite Index (SHCOMP) that doubled in 10 months through August 2009 post-governmental stimulus of $652 billion, has gone down 43 percent – this means, investors have lost nearly $748 billion.
Slower Growth Rate
The national economy of China grew at 7.5; it slowed for a second straight quarter in the three months ending June. Now, it is below 8 per cent for quite some time. Whereas exports fell 3.1 percent in June from a year earlier, industrial profit growth is also not doing well, as it went down to 6.3 percent from 15.5 percent in May.
To contact the reporter of this story: Jonathan Millet at email@example.com