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Shares plummet amid fear of interest rate rise

By Jin Jing (China Daily)
Updated: 2008-06-28 08:26

SHANGHAI: The mainland stock market plunged 5.29 percent Friday, wiping 1 trillion yuan from total market capitalization, as investors expressed their fears of a further interest rate hike and concerns over sliding corporate profitability.

The benchmark Shanghai Composite Index fell 153.42 points to close at 2748.43, with 805 of 910 stocks closing down. The Shenzhen Component Index fell 5.63 percent, or 563.45 points to close at 9436.21.

Turnover on the two bourses totaled 94.63 billion yuan, down 10.56 percent from Thursday. The total capitalization was down 1 trillion yuan at 17.84 trillion yuan.

Figures from the National Bureau of Statistics (NBS) showed the profitability of Chinese industrial firms had worsened due to rising cost pressures, price controls and overcapacity.

Wu Feng, an analyst with TX Investment Consulting, said: "The declining corporate earnings made investors nervous about deteriorating earnings of listed companies."

The profit growth of Chinese industrial companies fell sharply to 20.9 percent from January to May, down from 42.1 percent a year ago, the NBS said. Profit margins, as measured by profit-to-sales ratio, also fell to 8.2 percent in March, the lowest in four years, it said.