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Stock drop not caused by index futures

05-18-2010 13:37 BJT

BEIJING, May 18 -- The recent market decline shouldn’t be blamed on index futures, the China Securities Journal quoted Wang Lianzhou, former deputy director of National People’s Congress financial and economic committee, as saying yesterday.

Other major newspapers, including the People’s Daily and China’s Financial Times, have also published reports in past days denying the link between China’s stock drop and the launch of index futures a month ago. The People’s Daily published three reports on this topic in the past four weeks.

The benchmark Shanghai Composite Index entered a bear market last week, falling more than 20 percent from the November peak, on concerns about government measures to tame the property market and the effects of the European debt crisis on exports.

Investor Mark Mobius said Friday the start of derivatives trading may be adding pressure to the stock market.

“This, of course, will create more volatility,” Mobius said. “So I’m not surprised that you have a downturn like that.”

Futures, or agreements to buy or sell the CSI 300 Index at a preset value, began trading on the China Financial Futures Exchange in Shanghai on April 16, while margin trading and short selling was introduced March 31.

The volatility of the stock market was larger before the introduction of index futures, the report quoted Wang as saying.

Li Maoyu, an analyst at Shanghai-based Changjiang Securities, said the stock markets recent sell-off was mainly because of concerns about the domestic economy.

China International Capital Corp. on May 10 cut its estimate for China’s economic growth this year to 9.5 percent from 10.5 percent, citing property tightening measures and overseas “uncertainties.” The economy expanded 11.9 percent in the first quarter from a year earlier.

“The stock index futures can increase the market volatility in the near term, and is one of the reasons leading to such a big fall but is not the main reason,”

Editor:Zhang Jingya |Source: Shenzhen Daily

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