The China stock market on Monday saw an end to the modest two-day winning streak in which it gathered more than 80 points or 3.3 percent in the process. The Shanghai Composite Index has still finished higher in nine of the previous 11 trading sessions, and the market remains above support at 2,350 points - although investors are expecting the SCI to slide below that level on Tuesday.
The global forecast for the Asian markets is broadly negative, with continued pressure likely among the automobile stocks and the financial issues. The European and U.S. markets finished sharply lower on Monday and the Asian bourses are tipped to follow that lead - although the losses may not be quite as heavy, since the Asian markets already suffered sizeable losses in Monday's trade.
The SCI finished modestly lower on Monday, tugged into negative territory by weakness among the oil and metal stocks. The losses were offset somewhat by gains among the brokerages.
For the day, the index eased 16.4 points or 0.69 percent to close at 2,358.04 after trading between 2,348.53 and 2,380.19. The Shenzhen Index was down by 83.73 points or 0.93 percent to finish at 8,910.42 for a combined turnover of 191.9 billion yuan. Losses outnumbered gains by 424 to 418 in Shanghai but gains outnumbered losses by 448 to 287 in Shenzhen.
Among the decliners, Aluminum Corporation of China Ltd. (Chalco) lost 3.76 percent, while Sinopec lost 1.32 percent, PetroChina was down 2.05 percent, Baoshan Iron & Steel dropped 2.5 percent, Lingyuan Iron & Steel was down 5.2 percent and Hunan Valin Steel declined 4.9 percent.
Bucking the trend, Datang Huaying Electric Power and Sinolink Securities both jumped by the daily limit of 10 percent and An Hui Wenergy rose 4.6 percent.
Wall Street offers another sharply pessimistic lead as stocks saw continued weakness throughout the trading day on Monday after moving sharply lower in early trading. While the major averages did not see much follow-through on their early downward move, they remained stuck firmly in negative territory. The weakness in the markets came as investors responded to disappointing news regarding the auto industry as well as renewed concerns about the outlook for the financial sector. Some traders also looked to cash in on the gains seen in the three previous weeks.
Much of the selling pressure came as President Obama and his auto task force indicated that General Motors (GM) and Chrysler have not gone far enough in their restructuring plans and need to step up their efforts to reorganize in order to receive additional government aid. While the administration will continue to provide operating funds for the next few weeks, it has given both GM and Chrysler a final deadline, threatening bankruptcy if the beleaguered auto giants do not significantly increase their efforts to restructure their business.
Additionally, at the request of the White House, Rick Wagoner has stepped down as chairman and CEO of General Motors, with Fritz Henderson, GM president and chief operating officer, set to replace Wagoner as CEO.
Financial stocks also experienced considerable weakness after Treasury Secretary Geithner suggested that more banks might need bailout funds. Appearing on the Sunday talk shows, Geithner explained that the ongoing stress tests for the financial industry have shown many other banks need funds from the TARP, although he said there is only about $135 billion left in the bailout pool.
Meanwhile, optimism surrounding this week's G20 summit has waned, as investors fear that earlier hopes that the countries will agree to a coordinated fiscal boost appear to have been crushed by skepticism in many European governments.
The major averages regained some ground going into the close of trading, but they remained firmly negative. The Dow closed down 254.16 points or 3.3 percent at 7,522.02, the Nasdaq closed down 43.40 points or 2.8 percent at 1,501.80 and the S&P 500 closed down 28.41 points or 3.5 percent at 787.53.
In corporate news, China North East Petroleum Holdings reported fourth-quarter profit of $7.6 million or $0.37 per share compared to $2.1 million or $0.09 per share last year, for an increase of 262 percent. Total sales increased 89 percent to $14.5 million from $7.7 million prior year. The company noted that the revenue increase was due to an increase in crude oil production and the average price received for crude oil offset by lower oil prices.
Also, China One Corp. has signed a number of additional contracts in China to develop dairy farms at various locations in China. The series of new cooperation agreements, entered into since the last quarter of 2008, cover five farms. Total commitments for cows to be delivered in 2009 under these new agreements are approximately 11,000 cows.
Under one of the contracts with Meishan City, China One is to deliver 2,000 cows by the end of 2009 and another 3,000 cows by the end of 2011. Under another contract with Lingbao City, the Company is to deliver 3,500 cows by the end of 2009 and another 2,500 cows by the end of 2011.
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