Mainland markets among top decliners

PUBLISHED : Saturday, 31 December, 2011, 12:00am
UPDATED : Saturday, 31 December, 2011, 12:00am


Mainland stocks ended the year with their third-biggest annual loss yesterday as skittish investors remained pessimistic about next year.

The Shanghai Composite Index rose for a third day, gaining 25.86 points or 1.19 per cent to 2,199.42 yesterday. However, this was a 21.7 per cent drop from last year's close.

The annual loss trailed only the 65.4 per cent decline in 2008 and the 22.3 per cent fall in 1994. It also made the mainland market one of the world's top decliners this year, following a 14.3 per cent drop last year, the third worst-performing market then.

'Investors totally lost hope given the poor market performance,' said West China Securities trader Wei Wei. 'The poor run will continue in 2012 because there are no signs that fundamentals will improve or the government will intervene.'

Yesterday's rise was bolstered by expectations that Beijing would loosen monetary policies in the new year to inject fresh liquidity into the banking system.

But analysts said it would not be enough as investors were mired in bearish sentiment.

'The market performance in 2011 proved more ruthless to investors than 2010,' said Wei Daoke, an analyst with Shenyin Wanguo Securities. 'Investors could hardly find a safe haven throughout the year with all stocks going down.'

The woeful market movement mainly resulted from a liquidity drain as Beijing tightened monetary policies and curbed bank loans to contain inflation.

On the mainland, a monetary easing usually causes speculative capital to flood into equities as investors chase quick returns on volatile stocks. Tightening normally leads to huge capital outflows and a strain on funds, creating a bear market.

Mounting worries of a double-dip recession in the global economy and a flood of new share offerings accelerated the downward momentum.

Some analysts said the key indicator would fall another 20 per cent before bottoming out. A clutch of planned large listings are likely to further dilute existing holdings.

In the past year, 280 offerings soaked up 270 billion yuan (HK$329 billion) from the embattled Shanghai and Shenzhen stock exchanges. This was down 44 per cent from last year, but the mainland remained the world's largest market for listings.

The China Securities Regulatory Commission has approved the listings of Shaanxi Coal Industry and China Communications Construction. Along with other industry heavyweights. they are expected to absorb billions of yuan in the first quarter of next year when they launch their share offerings.

Mainland investors are hoping that the CSRC's new chairman, Guo Shuqing, will introduce measures to boost the market.

30m yuan

The minimum total share capital a company must offer before it can be listed on the Shanghai stock exchange