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Stocks poised to stretch losses in weak market

By Yu Xi (Global Times)

08:05, June 25, 2012

China's mainland stock markets may extend Thursday's weak finish into this week as an economic recovery is unlikely to materialize any time soon, say analysts.

The Shanghai Composite Index closed out trading at 2260.88 points last week, down 1.99 percent week-on-week; while the Shenzhen Component Index ended at 9682.69 points, dropping 2.05 percent during the same period. China's stock markets were closed for the Dragon Boat Festival Friday.

Both exchanges started trading last week on a considerable increase due to the results of the Greek elections, which eased some of the anxiety surrounding the country's possible exit from the eurozone. But the wind was taken out of the markets' sails Tuesday on overnight contractions in the US and European markets.

China's social security fund opened eight new accounts at the Shanghai and Shenzhen exchanges respectively in May, an apparent sign of the government's commitment to the securities market. This, however, did little to help exchanges Wednesday, as both of China's major indices retreated thanks to a slump in real estate stocks as the government reaffirmed its commitment to reining in the country's housing market through property restrictions.

Markets were dealt a further blow Thursday after the release of HSBC Holdings and Markit Economics' Flash PMI, which slid to 48.1 in June, a seven month low and down from a reading of 48.4 in May.

Market sentiment was also dashed by the US Federal Reserve's move to withhold an anticipated round of quantitative easing, which raised concerns about the gloomy prospects of the global economy, according to analysts.

"Investors have accepted the fact that the economy is going to be bad and stimulus measures will be slow …there's little impetus to enter the market so stocks will be dragged down in the near term," according to a report by Bloomberg Thursday, citing Chen Liqiu, a strategist at Shanghai-based Jianghai Securities Co.

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