China Stocks Tumble 4.1 Percent

China's main stock index tumbled 4.13 percent to a new 11-month closing low on Tuesday after the central bank repeated its commitment to a "tight" monetary policy., Reuters 4/1/2008 6:55:41 AM

The central bank said late on Monday that policy would stay tight to fight inflation. The bond market does not believe this, and yields fell on Tuesday as traders welcomed the central bank's references to flexibility as suggesting policy might actually be loosened later this year to sustain economic growth.

But Monday's statement was seen as negative for the stock market by indicating authorities were not taking pains to avoid damaging investor sentiment, and were therefore unlikely to adopt strong measures -- such as a cut in the stock trading tax -- to halt the slide in share prices.

The Shanghai Composite Index .SSEC, which plunged 34 percent in the first quarter of this year, its biggest quarterly loss since 1992, ended at 3,329.162 points after hitting an intra-day low of 3,308.902.

Losing Shanghai shares overwhelmed gainers by 876 to 23, while turnover in Shanghai A shares was thin at 72.8 billion yuan ($10.4 billion), though slightly up from Monday's 66.7 billion.

The index is 46 percent below last October's record high, hurt by concern about its ability to absorb large new supplies of shares and by the prospect of slowing corporate profit growth.

Technically, the index's close below support on its June 2007 low of 3,404 points was bearish. Many analysts see no further major support before the 3,000-point area.

Corporate earnings to be announced this month may be worse than expected, which will weigh on the market, major brokerage Shenyin Wanguo Securities said in a note to clients after the market closed. The index is expected to fluctuate between 3,150 and 3,700 points in April, it said.

China Stocks Tumble 4.1 Percent