13 June 2016 at 9:54 GMT
- Shanghai Composite Index dropped 3.21% to 2833.07
- Growth Enterprise Market Index slumped by 6.03% to 2054.71
- All sectors closed in the red except precious metal shares
China in the red amid global market selloff. Image: iStock
By Jay Luo
China's stock markets tumbled on Monday amid a global market selloff. The benchmark Shanghai Composite Index dropped 3.21% to 2833.07 and the Growth Enterprise Market Index slumped by 6.03% to 2054.71. All sectors closed in red except precious metal shares.
Shanghai Composite Index, Daily
Market sentiment was undermined during China’s Dragon Boat Festival holiday as overseas stock markets slumped and the offshore Chinese yuan reached a four-month low versus US dollar.
Growth Enterprise Maket Index, Daily
At the same time, China official data released on Monday showed China's fixed-asset investment growth eased to 9.6% year-on-year in the January-May period, the lowest level since May of 2000 and well below the market expectation of a 10.5% rise.
The growth rate of private fixed-asset investment dropped sharply to 3.9% in January-May period. The poor data indicates that economic growth is out of steam and one of the reasons is that oversupply depressed corporate profit margins.
Slowing growth rate of fixed assets investment in China
Data released on Monday also showed China’s value-added industrial output rose 6.0% in May from a year earlier, the same as the previous month and in line with market expectation. Retail sales grew by 10.0% in May compared with a year earlier, down from a 10.1% increase in April.
Another factor for China stock market slump is that lock-up shares worth 262 billion yuan will become eligible for trade in June, a 37.74% rise compared with May.
Some investors also attributed to the selloff to European Cup in football as China shares usually perform badly during major sports events.
In general, the market is now at a delicate stage as investors nervously wait for the decision by MSCI on A-shares’ inclusion into MSCI emerging market index, as well as the decision of the Federal Reserve on interest rates.
— Edited by Clare MacCarthy
Jay Luo is an editor and analyst at Saxo Capital Markets in China