China's stock market slides to 19-month low despite Olympic opening

["Olympic Flame Fails To Warm Mainland Market"]
Mainland stocks slid to a 19-month low yesterday as the start of the Beijing Olympics failed to ignite a market still concerned about slowing earnings and inflation.
The Shanghai Composite Index dropped 121.858 points or 4.47 per cent to 2,605.719, the lowest close since December 28, 2006, while its Shenzhen counterpart shed 44.577 points or 5.63 per cent to 747.341.
The Hang Seng Index also failed to catch the Olympic fever, falling 218.99 points or 0.99 per cent to close at 21,885.21.
"The sharp fall before the Games was beyond expectations," said Shenyin Wanguo Securities analyst Wei Daoke. "Investors are learning it is a big task to maintain stability."
Analysts said yesterday's drop would lead to a more severe decline during the two-week Games, as investors gave up their last gasp for a rally during the global sports event.
Investors were still worried about the impact of slowing economic growth on corporate earnings as well as soaring inflation, analysts said.
Investors took to Xinhua website chatrooms yesterday to vent their dismay with the market, with one sarcastically noting that "the Shanghai and Shenzhen indices had helped China clinch the gold and silver medals in the diving event".
The decline also embarrasses securities regulators who have failed to stabilise the moribund market despite various measures.
The China Securities Regulatory Commission has made an all-out effort to underpin the troubled stock market, from telling fund managers not to make bearish comments to ordering them not to dump shares.
But the Shanghai index has slumped 50.48 per cent so far this year and is 57.23 per cent off its peak in mid-October last year.
"The drop reflected investors' anger towards regulators," said Haitong Securities analyst Zhang Qi. "People have totally lost their patience."
Property plays led the decline, with Shenzhen-listed bellwether China Vanke declining 4.76 per cent to 8 yuan (HK9.11 dollars).
The Royal Institution of Chartered Surveyors expects average housing prices in 70 major mainland cities to have fallen in July, the first monthly decline in 18 months, as the economic slowdown and slower mainland exports hit home.
The National Development and Reform Commission will release official housing figures for last month next week.
In Hong Kong, analysts expect the Hang Seng Index to fluctuate in a narrow range during the Games.
"It is still in a correction as there is no clear direction for the market," said Bright Smart Securities general manager Nelson Chan Kai-fung. "The Hang Seng will find its bottom at around 21,000 points."
The index surged as much 126.35 points in early trading yesterday but retreated as it paced the decline in the mainland market.
"Some people believe that the Games will help boost the market but in reality there is no correlation between the two," said Altruist Financial Group director of financial analysis Yiu Chin.
The blue-chip index has slumped 5,927.44 points or 21.31 per cent so far this year.
"Investor sentiment will hardly pick up until the stock market returns with more attractive valuations and real interest rates are in negative territory," said JP Morgan chairman for China equities Jing Ulrich.
Mainland metals stocks continued to decline in Hong Kong as investors worried that metal prices have seen their peaks and will fall further amid a global economic slowdown.
Some stocks have fallen to their lowest in more than a year.
Aluminium Corp of China fell 3.13 per cent to HK6.49 dollars, a 19-month low, bringing its loss for the week to 16.04 per cent. The company cut the price of its biggest profit contributor, alumina, by 8 per cent early this month due to a supply glut. In June, it said it would post a profit decline of more than 50 per cent for the first half.
Zijin Mining Group slid 5.66 per cent to HK5 dollars, a one-year low, and was down 16.67 per cent for the week. New York gold futures fell 5.4 per cent between Monday and Thursday as the US dollar rebounded.
Angang Steel tumbled 6.37 per cent to HK11.46 dollars to its lowest since March last year. The stock lost 26.06 per cent of its value this week.
Analysts warned that steelmakers' profit margins would be squeezed in the second half as demand and prices softened amid higher iron ore prices.