SHANGHAI: The mainland stock market plunged a further 4.13 percent yesterday, losing over 1 trillion yuan in total capitalization after the central bank said monetary tightening policies will stay.
The benchmark Shanghai Composite Index fell 143.55 points to close at 3329.16, the lowest since April 6, 2007. Losers outnumbered gainers by 838 to 21. The Shenzhen Component Index slid 6.33 percent, or 841.51 points, to close at 12460.62.
Turnover on the two bourses amounted to 108.6 billion yuan, up 12 percent from last Friday. Total capitalization shrank 5 percent to 21.46 trillion yuan.
The central bank said on Monday multiple tools will be used to keep lending under control and tightening monetary measures will continue. That's expected to amplify the liquidity squeeze on the market.
"There's a liquidity crunch in the equity market, with no new funds flowing in, but a large amount of capital flowing out of the market," Zhu Haibin, an analyst at Essence Securities, said.
Over 600 stocks slid to the daily allowable limit in yesterday's trading, most of which were small and medium-sized companies. "The valuation of small and medium-sized companies is much higher than large-caps," Wu Feng, an analyst at TX Investment Consulting Co Ltd, said.
The price of small and medium-sized companies was around 35.8 times their corporate earnings in 2007, while that of large-caps was 24.6 times, TX Investment Consulting Co Ltd said.
Large-caps fell yesterday. China Aluminum slid 7.71 percent to close at 18.79 yuan, while oil refiner Sinopec tumbled 3.71 percent to close at 11.68 yuan.
After the sharp correction over the past two months, dual-listed companies' A-share prices had an average 50 percent premium on their H-share counterparts, dropping from a 108 percent premium in mid-January, Hang Seng China AH Index said.
"The projection for corporate earnings this year is expected to be reduced by some stock brokers because of rising costs and decreasing equity investment income," Fullgoal Fund Management Co Ltd said in a report.