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Further Damage Tipped For China Stock Market

The China stock market has closed lower in two of three sessions since the end of the two-day winning streak in which it had collected more than 35 points or 1.5 percent. The Shanghai Composite Index finished just above the 2,375-point plateau, and now traders are looking for more contraction when the market kicks off trade on Friday.

The global forecast for the Asian markets suggests consolidation, reacting to soft economic data from around the world. China's manufacturing sector shrank for a fifth consecutive month in March, Markit Economics said on Thursday. Also, Eurozone private sector activity fell more sharply than expected in March. The European and U.S. markets finished lower, and the Asian markets are expected to open in similar fashion.

The SCI finished barely lower on Thursday as losses from the resource stocks were offset by support from the financials.

For the day, the index eased 2.42 points or 0.10 percent to finish at 2,375.77 after trading between 2,364.13 and 2,386.10 on turnover of 76.90 billion yuan. The Shenzhen Component Index fell 51.48 points or 0.51 percent to end at 10,038.95 on turnover of 68.13 billion yuan.

Among the decliners, Sinopec shed 0.93 percent, while PetroChina lost 0.49 percent, Inner Mongolia Baotou Steel Rare Earth plunged 5.48 percent and Xiamen Tngsten plummeted 5.28 percent.

Moving higher, Industrial and Commercial Bank of China added 0.70 percent, while Agricultural Bank of China jumped 1.15 percent, Poly Real Estate climbed 1.03 percent, Gemdale Corporation spiked 1.19 percent and China Vanke collected 0.61 percent.

The lead from Wall Street is negative as stocks declined on Thursday, with renewed concerns about the global economic outlook weighing on the markets - sparked by disappointing data from overseas.

HSBC reported that its index of activity in the Chinese manufacturing sector fell to 48.1 in March from 49.6 in February, with a reading below 50 indicating a contraction. With the drop, the index suggested that Chinese factory activity shrank for the fifth consecutive month.

Adding to the negative sentiment, Markit Economics indicated that Eurozone private sector activity fell more sharply than expected in March. Markit Economics said that its composite output index for the Eurozone fell to a three-month low of 48.7 from 49.3 in February.

On the other hand, the U.S. Labor Department reported that initial jobless claims fell to a four-year low of 348,000 from the previous week's revised 353,000. Economists had expected claims to edge up to 352,000 from the 351,000 originally reported for the previous week. With the decrease, claims fell to their lowest level since 347,000 in the week ended March 8, 2008.

Also, a report from the Conference Board showed that its index of leading U.S. economic indicators rose by more than expected in February, pointing to a more positive outlook for U.S. economic activity in the first half of 2012.

Among individual stocks, shares of FedEx (FDX) came under pressure even though the delivery giant reported better than expected adjusted third quarter earnings and provided upbeat full-year guidance. FedEx fell by 3.5 percent amid the concerns about demand in China.

The major averages ended the session off their worst levels of the day but still closed firmly in the red. The Dow fell 78.48 points or 0.6 percent to finish at 13,046.14, while the NASDAQ slipped 12.00 points or 0.4 percent to end at 3,063.32 and the S&P 500 dropped 10.11 points or 0.7 percent to 1,392.78.

In economic news, the Chinese Academy of International Trade and Economic Cooperation said that consumption will grow 15 percent this year, overtaking investment as the country's biggest growth driver this year for the first time in a decade.

Also, China's foreign debt fell to $695 billion at the end of 2011, the State Administration of Foreign Exchange said on Thursday. It decreased from $697.2 billion in the third quarter. The registered foreign debt totaled $445.79 billion, of which 75.94 percent was denominated in the U.S. dollar and 8.06 percent in Japanese yen. Euro denominated debt was 7.49 percent. According to commerce ministry, China attracted $7.7 billion in foreign direct investment in February, down 0.9 percent on year.

by RTTNews Staff Writer

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