Mainland stocks fall as market liquidity dries up

Chinese mainland stocks fell broadly on Monday, curbed by diminishing market liquidity, which experts sees a roadblock to a rebound in domestic shares.

The benchmark Shanghai Composite Index shed 1.76 percent to close at 2,980.43 points, while the Shenzhen Component Index finished the day 2.05 percent lower at 10,392.70 points.

The CSI 300 Index of the biggest companies traded in Shanghai and Shenzhen declined 1.69 percent to 3,220.28 points.

The ChiNext Index, which tracks the country’s NASDAQ- style board for growth enterprises, lost 1.56 percent to close at 2,122.90 points.

A total of 425.20 billion yuan ($ 63.74 billion) in shares changed hands on the Shanghai and Shenzhen exchanges on Monday.

Analysts from Jufeng Investment Information Co predicted that stocks would soon recover from their recent decline because the Federal Reserve decided against raising interest rates on Wednesday, which relieved some of the pressure on mainland markets.

Analysts from Founder Securities noted that the diminishing liquidity, as seen in the thin trading volumes of late, has left stocks with limit room to rise.

In addition, the issuance of new shares, especially bank shares, has siphoned off a lot of money from other stocks, the analysts said. Besides, a large amount of domestic funds has recently flowed into the soaring housing market and the rising Hong Kong stock market.

Analysts from AVIC Securities said that investors don’t need to be too worried about Monday’s drop in the major stock indexes because market volatility remained in a controllable range.