Chinese shares tumble again as government works to rein in liquidity

Chinese shares took another tumble on Thursday as investors panicked at news that the government was considering further measures to rein in excess liquidity and cool down the stock markets.

The benchmark Shanghai Composite Index dropped 4.03 percent to close at 3,914.2 points, down 164.4 points. The Shenzhen A-share index slumped 701.53 points, or 5.2 percent, to conclude the day at 12,882.17 points.

On Wednesday, the lawmakers began discussing a draft bill authorizing the Ministry of Finance to issue 1.55 trillion yuan of special treasury bonds that will be used to purchase 200 billion U.S. dollars of foreign exchange in a move that was considered another measure to diminish liquidity.

National legislators also convened on Wednesday to discuss whether the current tax on deposits interest should be suspended or slashed. The move was seen as offering incentives for saving rather than investment.

The market heavyweights led the fall. Sinopec, China's largest oil refiner, fell 4.5 percent to 13.36 yuan, the Bank of China was down 1.76 percent to 5.02 yuan, the Industrial and Commercial Bank of China down 0.98 percent to 5.05 yuan, and China Life, the country's largest life insurer, down 4.03 percent to 43.1 yuan.

The Hushen 300 Index, which tracks 300 companies on the Shanghai and Shenzhen stock exchanges, closed at 3,858.52 points, down 181.96 points, or 4.5 percent, from the previous close.

Source: Xinhua

People's Daily Online ---