Mainland stocks join worldwide declines

(China Daily)
Updated: 2008-11-19 08:55

Profit-taking and worries about a slowing economy caused Chinese mainland shares to fall sharply after advancing for four trading days as stocks fell across Asian markets.

The benchmark Shanghai Composite Index sank 6.31 percent, or 128.5 points, to close at 1902. The smaller Shenzhen Component Index lost 7.22 percent to 6293.

China's central bank said in a report Tuesday the risks of an economic downturn in the country are growing.

Stocks rallied last week after Beijing announced a $586 billion stimulus package to spur the economy. But analysts said the boost is unlikely to last because investors are pessimistic.

"Investment funds didn't participate too much in the recent strong run," said Tang Xiaosheng, an analyst for Guosen Securities.

"Long-term investors didn't see the government action having substantial effect on the capital market."

Asian stock markets sank after Wall Street retreated and global financial firms announced another round of massive layoffs, adding to gloom about the world economy.

Hong Kong's Hang Seng Index shed 4.5 percent to 13131.23. Tokyo's Nikkei 225 stock average fell 194.17 points, or 2.3 percent to 8328.41, a day after confirmation that Japan, the world's second largest economy, had slipped into recession.

Australia's main index declined 3.6 percent and South Korea's Kospi fell 3.9 percent.

"There's no question that the economies of both the United States and Japan are doing poorly and will do worse, so the downside risk is quite high," said Toshihiko Murai, general manager of equities at Nozomi Securities.

Investors are worried by news the financial sector, still struggling more than a year after the subprime crisis erupted in the US and spread to Europe, continues to hemorrhage thousands of jobs.

Citigroup announced overnight nearly 53,000 layoffs in the coming quarters amid massive losses from deteriorating debt tied to bad mortgages.

HSBC Holdings, Europe's largest bank by market value, said it plans to cut 500 jobs in Asia due to the global economic slump.

"The entire world seems to be sinking into recession," said Francis Lun, general manager of Fulbright Securities Ltd in Hong Kong. "Everyday there are corporate layoffs and economic bad news. Slowly but surely they are losing hope in markets."

David Evans, analyst at BetOnMarkets.com, said: "Analysts are no longer wondering if we are in a recession. The question now is how long and how painful this economic contraction will be."

European markets traded lower Tuesday.

The FTSE 100 index of leading British shares was down 70.72 points, or 1.7 percent, at 4061.44, while Germany's DAX was 98.00, or 2.2 percent, lower at 4459.27. The CAC-40 in France was down 63.10, or 2.0 percent, at 3118.93.

On Wall Street, the Dow Jones industrial average opened flat, falling 16 points to the 8258 level.

Agencies