RTTNews - The brutal losing streak has stretched to three sessions for the China stock market, which has given away almost 300 points or 10.5 percent on its way to a three-month closing low. The Shanghai Composite Index is now holding support at the 2,660-point plateau, although investors are expecting the market to slide through that level when it kicks off trade on Tuesday.
The global forecast for the Asian markets remains solidly pessimistic after most of the markets saw heavy losses in Monday's trade. Resource stocks are expected to remain under pressure following a fall in commodity prices, while airlines, properties and financials also could see significant losses. The European and U.S. markets finished broadly negative, and the Asian markets are also tipped to move to the downside.
The SCI finished sharply lower on Monday, thanks to persistent concerns regarding liquidity and the potential government tightening thereof. Financials led the market to the downside, along with the coal miners and other resource stocks.
For the day, the index plunged 192.94 points or 6.74 percent to close at 2,667.75 after trading between 2,663.00 and 2,817.63. The Shenzhen Index plummeted 864.99 points or 7.55 percent to finish at 10,585.09 for a combined turnover of 196 billion yuan. Decliners outnumbered gainers by 842 to 27 in Shanghai and 726 to 23 in Shenzhen.
Among the decliners, Sinopec was down by the daily 10-percent limit, while Industrial and Commercial Bank of China shed 2.38 percent, China Construction Bank fell 3.68 percent, China Shenhua plunged 9.77 percent and PetroChina dropped 6.7 percent.
The lead from Wall Street is firmly negative as stocks remained mostly negative 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 initial downward move, they remained stuck in the red.
The weakness in the markets came as a sell-off in the Chinese stock market inspired some traders to cash in on recent strength. Nonetheless, selling pressure remained relatively subdued ahead of the release of some key economic data later this week.
Traders largely shrugged off the results of the Institute for Supply Management - Chicago's survey of regional manufacturing activity, which showed that activity unexpectedly reached neutral territory in August following ten consecutive months of contraction. The index of manufacturing activity rose to 50.0 in August from 43.4 in July, with a reading of 50 acting as the breakeven point versus contraction and expansion. Economists had been expecting a more modest increase to a reading of 48.0.
In corporate news, Walt Disney (DIS) announced that it has agreed to acquire Marvel Entertainment (MVL) in a stock and cash transaction. Marvel shareholders will receive a total of $30 per share in cash plus approximately 0.745 Disney shares for each Marvel share they own.
The major averages moved well off their lows going into the close, although they still ended the day firmly in negative territory. The Dow closed down by 47.92 points or 0.5 percent at 9,496.28, the NASDAQ fell by 19.71 points or 1 percent to 2,009.06 and the S&P 500 slipped by 8.31 points or 0.8 percent to close at 1,020.62.
In economic news, China is on Tuesday set to release its July purchasing managers' index for manufacturing, with forecasts calling for a score of 53.5. That follows the 53.3 reading in June.
In corporate news, Sina Corp., an online media company and information service provider, on Monday reported a sharp decline in its second quarter profit, absent a gain recorded in the prior year quarter and on lower margins. Revenues dropped marginally, hurt by weak advertising revenues. Earnings, however, came in line, while revenues beat forecast. Looking ahead, Sina said it expects third quarter revenues below Street estimates.
For the second quarter, net income of the Shanghai, China-based company plunged 41 percent to $13.34 million or $0.23 per share from $22.54 million or $0.37 per share in the same quarter last year. On a non-GAAP basis, net income totaled $17.12 million or $0.29 per share, compared to $23.52 million or $0.39 per share in the year-earlier quarter.
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