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Bank stocks retreat on rate cuts

By Wang Fei'er (Global Times)

08:20, June 11, 2012

Despite the government's push to expand market capital, investors are still wary about the nation's stock market as China's economy remains mired in a downturn.

The Shanghai Composite Index ended trading last week at 2,281.45 points, down 91.99 points or 3.88 percent week-on-week, while the Shenzhen Component Index closed at 9,707.18 points, down 438.62 points or 4.32 percent compared with the previous week.

The trading volume of both the Shanghai and Shenzhen markets shrank 24.06 percent week-on-week to 624.04 billion yuan ($97.97 billion) during the preceding five trading days.

The central bank cut interest rates late Thursday, just two days before the release of May economic indicators which hinted that China's economic activity would remain tepid for the foreseeable future.

Weak market sentiment overrode the government's goal of boosting liquidity to end the trading week on a down note, especially for banking stocks, say analysts.

After the rate cuts, news of deposit rate increases by some banks raised fears about a slump in earnings and was enough for the heavily weighted banking sector to contract 1.38 percent Friday. While China's three largest State-owned banks dropped less than 0.9 percent, local city lenders saw their shares gave up an average of 2 percent in the most recent day of trading. China Minsheng Banking Corp fell by 3.65 percent on the day.

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