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Mainland stocks buffeted by slowdown concerns

By Yu Xi  (Global Times)

09:08, August 13, 2012

Chinese stock markets ended with losses Friday after the release of weak July macro data again sparked worries about the faltering domestic economy.

The Shanghai Composite Index finished trading at 2,168.81 points Friday, down 5.29 points, or 0.24 percent; while the Shenzhen Component Index closed at 9,238.20 points after slumping 99.34 points, or 1.06 percent, on the day. Combined turnover on the two bourses shrank to 124.32 billion yuan ($19.52 billion) Friday, down from 135.93 billion yuan Thursday.

The brewing, securities and real estate sectors were the major losers Friday. Kweichow Moutai Co, a high-end liquor company in China, gave up 4.87 percent to 248.21 yuan.

Both markets kicked off last Monday with solid gains after investors responded favorably to a draft issued late the previous day by the China Securities Regulator Commission (CSRC) which would pave the way for staff at listed firms to hold stocks in their companies.

The Shanghai Composite and Shenzhen Component largely retained Monday's gains throughout trading Tuesday and Wednesday as most investors held off from making big moves as they awaited the impending release of a raft of economic indicators for July, according to analysts.

Both benchmarks surged up Thursday after China's consumer price index (CPI) for July dropped to 1.8 percent, a 30-month low, according to figures issued by the National Bureau of Statistics (NBS), fueling wide speculation that the government would capitalize on the drop in inflation to loosen its monetary policies.

Thursday's rally was short-lived however, as soft trade and borrowing figures sent local markets retreating Friday. During July, the country's exports grew just 1 percent year-on-year to $176.94 billion, a six-month low as demand for Chinese goods dwindles overseas, according to the General Administration of Customs Friday. Meanwhile, imports expanded 4.7 percent year-on-year to $151.79 billion during the same time, down from a growth rate of 6.3 percent recorded in June. The central bank announced Friday that the country's retail lenders extended 540.1 billion yuan in renminbi-denominated loans in July, a ten-month low.

"Worse-than-expected trade data, ... and lower loans figures have put the focus firmly back on China today - with pressure increasing on their policy makers to introduce further stimulus measures," according to a report by AFP Friday, citing Rebecca O'Keeffe, head of investment at Interactive Investor, an online brokerage firm.

While confidence might have stepped up briefly last week, the chances that mainland stocks will be able to rebound in the short term is still unlikely as China's economic prospects for the second half of this year are still uncertain in light of recent macro economic readings, according to a report by the China Business News Sunday, citing Gui Haoming, a chief analyst at Shenyin & Wanguo Securities.

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