MercoPress. South Atlantic News Agency

China's stock markets suffer biggest weekly drop since 1996

The bear market in Chinese stocks deepened on Friday as the main index tumbled 3% to a new 15-month closing low, 13.89% down over the week, the biggest weekly drop since 1996.

Shares slid across the board led by brokerages and real estate developers in response to tightening monetary policy and fears that rising raw material prices and fuel would slow corporate profit growth. The Shanghai Composite Index closed lower for the eighth straight day, ending at 2,868.800 points. It has plunged 53% from last October's record peak. Falling Shanghai stocks outnumbered gainers by 831 to 69 on Friday, with over 40 Shanghai A shares down their 10% daily limits. Turnover in Shanghai A shares was a very thin 45.0 billion Yuan (6.5 billion US dollars), near its lowest levels since 2006, before last year's bull-run lured millions of new investors to the market. The index broke on Friday below a band of technical support between 2,956 points, 61.8% of its bull run from mid-2005, and a low of 2,990.788 hit on April 22. Analysts said there was a good chance of a drop to 2,800 points in coming days, and some are talking of the market reaching 2,500 in coming weeks. This week's slide was triggered by a harsher-than-expected tightening of monetary policy by the central bank as it battled inflation, which is near eleven year highs. Data from this week showed May consumer price inflation had eased a bit to 7.7% but producer price inflation rose to 8.2% exceeding consumer inflation for the first time in 15 months. On Friday the People's Bank of China (Central bank) vowed to take "forceful" measures to curb excessive price rises and enhance monitoring of cross-border capital flows. It will also try to improve the assets market and try to prevent drastic fluctuation of assets prices, the central bank said in the annual financial stability report reviewing last year's financial and economic developments. Chinese leaders, including President Hu Jintao and Premier Wen Jiabao, said in a meeting on Friday that China will promote "the healthy development of the capital markets and prevent inflation from worsening", according to State radio report.