SHANGHAI stocks tumbled to a month-low yesterday as investors began to doubt if China's economic recovery could be sustained and also worried over a possible tighter monetary policy after the central bank drained funds from the market.
The Shanghai Composite Index fell 1.4 percent to 2,293.34 points yesterday, the lowest level since January 25.
"The market began to doubt about (how strong is) the economic recovery, after HSBC said the preliminary reading of the purchasing manager's index fell to the lowest in four months (in February)," Haitong Securities Co said in a research note yesterday.
It cautioned the stock index may extend its loss further in the short run, adding that "investors should remain cautious."
Echoing Haitong's tone, China Merchants Bank said in a note yesterday the index "is expected to continue to weaken" as there's nothing to suggest the gauge will stabilize in the short run.
Meanwhile the People's Bank of China continued to tighten market liquidity by draining 5 billion yuan from the interbank market yesterday through repurchase contracts. The PBOC withdrew 910 billion yuan last week, the biggest weekly amount ever, signalling a tightening monetary stance to curb excessive funds and rising property prices.
The Industrial and Commercial Bank of China, the nation's biggest lender, shed 1 percent to 4.1 yuan and the Bank of Communications, the fifth-biggest lender, fell 1.2 percent to 4.92 yuan.
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