The Chinese mainland’s benchmark Shanghai Composite Index ended four of its five trading days last week down, with a week-on-week drop of 2.30 percent to 2,642.82 points, the lowest closing point since September 29, 2010.
The Shenzhen Component Index closed last Friday at 11,409.16 points, after a decrease of 1.59 percent week-on-week.
The two indices last Friday saw combined turnover of 121.062 billion yuan ($18.71 billion), contracting by around 10 percent from the 128.2 billion yuan turnover of Thursday.
For both indices, it was the second week-on-week drop in a row.
Last week’s performance could be seen as the beginning of a fifth round of descents since the whole market started diving on April 19, according to the Guangzhou-based Wanlong Securities. This round could see the Shanghai Composite hover between 2,580 points and 2,600 points until the end of June, according to their analysis.
A total of 19 billion yuan capital retreated from markets last week, compared to only 2.63 billion yuan during the previous week.
Among all sectors and boards, construction material and steelmaking were the only two sectors to see a net inflow of capital, while the SME board, new energy and new material and pharma sectors saw the biggest capital outflows.
After the release of May’s macroeconomic data at the beginning of last week, the whole market was optimistic about the news that May’s CPI was not as bad as formerly predicted, resulting in a huge rally on Tuesday.
But amid the mounting inflationary pressure, the central bank resorted to increasing the reserve requirement ratio, digressing from nearly all the investors’ and analysts’ previous forecasts that a rise in interest rates was around the corner.
Clearly, hiking the requirement ratio will have less damage on the market than lifting rates, but the whole market overacted to the ratio rise last Wednesday by ending with a slump offsetting Tuesday’s increases, according to China Business News.
Besides, the value of the US dollar last week jumped by 2 percent against the euro – the highest gain since last August, amid fears over the worsening debt crisis in Europe, particularly in Greece.
This triggered most commodities prices and the US stock markets to go down, in turn putting pressure on A-shares in the nonferrous metal and coal sectors. The China Business News analysis suggested investors keep track of developments in the European debt crisis.
A majority of analysts predicted bearish markets at least until the end of the month.
Apart from the European nations’ sovereign debt crisis, the slowing US economy, China’s mounting inflation forecast and a fast pace of new stock listings have depressed the market.
After many rounds of interest rate and reserve requirement ratio rises, China still faces a high inflationary forecast, stoking expectations of further rates rises.
The approaching launch of Shanghai’s international board will put market capital under further strains, analysts said.