RTTNews - The China stock market has finished lower now in back-to-back brutal sessions, retreating more than 270 points or 7 percent along the way. The Shanghai Composite Index slid below the 2,900-point plateau, and now analysts are expecting additional caution on Tuesday ahead of a series of corporate earnings this week.
The global forecast for the Asian markets is broadly pessimistic as markets around the world plunged on fears that an economic recovery is not quite as close as many had believed. Resource stocks are expected to see continued pressure - particularly the steel, oil and gold stocks - while the financials and properties also are forecast to see heavy selling pressure. The European and U.S. markets were sharply lower, and the Asian markets are tipped to follow that lead.
The SCI finished sharply lower on Monday, largely on concerns of declining liquidity amidst the resumption of some large IPOs - including the debut of brokerage China Everbright on Tuesday. Resource stocks, financials and property shares led the parade to the downside.
For the day, the index plummeted 176.34 points or 5.79 percent to close at 2,870.63 after trading between 2,867.39 and 3,020.26. The Shenzhen Index dropped 830.95 points or 6.65 percent to finish at 11,668.8 for a combined turnover of 214.47 billion yuan.
Among the decliners, Sinopec lost 5.8 percent, while PetroChina fell 6.1 percent, Bank of China dropped 5.05 percent and China Vanke plunged 9.95 percent.
The lead from Wall Street is brutally negative as stocks saw a sharp pullback on Monday, with last week's disappointing data on the health of the consumer sparking a broad-based sell-off in equities. The major averages all finished substantially lower, as some speculated that the markets rose in spite of weak fundamentals.
Also deflating traders' mood was news that Lowe's (LOW) second quarter earnings and revenues fell short of estimates. The home improvement retailer also provided disappointing guidance.
Nonetheless, some of the pessimism was moderated by the release of a report from the Federal Reserve Bank of New York showing that conditions for New York manufacturers improved for the first time in well over a year in the month of August. The New York Fed said its general business conditions index rose to 12.1 in August from a negative 0.6 in July, with a positive reading indicating an expansion in the manufacturing sector. Economists had been expecting the index to increase more modestly to 3.0.
Stocks rose by a modest margin after the National Association of Home Builders released its report on homebuilder confidence in the month of August, showing that its homebuilder confidence index rose to its highest level in over a year. The report showed that the NAHB/Wells Fargo Housing Market Index rose to 18 in August from 17 in July. With the increase, which came in line with economist estimates, the index rose to its highest level since June of 2008.
The major averages remained stuck in the red going into the close, finishing near their worst levels of the day. The Dow closed down by 186.06 points or 2 percent at 9,135.34, the NASDAQ fell by 54.68 points or 2.8 percent to 1,930.84 and the S&P 500 slipped by 24.36 points, or 2.4 percent to 979.73.
In corporate news, Air China and CITIC Pacific announced that they have entered into an agreement by which Air China has agreed to purchase 491.86 million Cathay Pacific Airways shares owned by CITIC Pacific Ltd. for an aggregate consideration of about HK$6.335 billion, representing a price of HK$12.88 per Cathay Pacific Share.
Assuming completion of the Air China Transaction, CITIC Pacific's shareholding in Cathay Pacific will decrease by 491.86 million Cathay Pacific Shares, representing about 12.5 percent of the issued share capital of Cathay Pacific. Assuming completion of such sale and purchase, Air China will increase its shareholding in Cathay Pacific to 1.18 billion shares, representing about 29.99 percent of the issued share capital of Cathay Pacific.
Also, China Techfaith Wireless Communication Technology reported second-quarter net income of US$4.5 million or US$0.10 per ADS, compared to net income of US$3.9 million or US$0.09 per ADS in the same quarter last year. Total net revenues for the quarter was US$49.8 million, down from US$56.6 million in the comparable quarter last year. For the third quarter, the company expects revenues to be in the range of US$47 million - US$52 million.
Finally, China Agritech Inc. reported second-quarter net income attributable to common stockholders of $5.59 million compared to $2.92 million last year. Earnings per share increased to $0.22 from $0.12 prior year. Net revenue increased to $20.99 million from $13.38 million a year ago. The company said it will exceed the projected fiscal 2009 guidance for net revenue of approximately $60 million and net income attributable to the stockholders of $9.5 million.
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