Domestic stocks were hammered Thursday after news of the consumer price index and other negative reports, as the benchmark Shanghai index lost nearly 300 points, the biggest drop since July 5.

Opening at 5,794.22 points, the Shanghai Composite Index rarely saw any strong rebounds in the morning and lost 200 points in the first session after the most recent CPI figures were released during trading. Although bargain hunters swooped in around 2 pm and pushed the index back up a little, it failed to claw its way out of the sharp fall and sank further amid panic selling during the last trading hour. The index finished at 5,562.39 points, 280 points, or 4.8 percent down from Wednesday, wiping out all gains made since October 1.

The Shenzhen Component Index also plunged to close at 18,175.31 points, 3.13 percent lower than Wednesday. The CSI 300 index covering major blue-chips in both markets dove 4.55 percent and closed at 5,333.79.

Due to massive panic selling during the plunge, turnovers in both markets reached 183.9 billion yuan (US$24.52 billion), with 1,283 stocks closing with losses, and only 70 remaining in the black. Some 400 stocks finished 10 percent down on the daily limit, almost one third of the two markets.

Almost no sector survived today's dive as a whole, even the popular large cap blue chips. BaoSteel, the nation's leading steel maker, lost 5.85 percent to 17.54 yuan per share. Shenhua Energy also fell 3.52 yuan to 77.11 yuan.

Financial stocks, although dwindling with the index, remained stronger than the market average amid the strong performance of the renminbi against the US dollar. ICBC shed 4.15 percent to 7.62 yuan, while China Construction Bank gained 0.83 percent and close at 9.73 yuan.

Stocks that were up include Dynamic Power, a Beijing-based info-tech firm that procured a second 10-percent gain today. Port of Nanjing barely touched the upper limit of 11.66 yuan.

The National Bureau of Statistics announced Thursday morning that China's CPI, a key inflation indicator, rose by 4.1 percent in the first nine months over the same period last year. Although it eased after surging to an 11-year monthly high of 6.5 percent in August, the September CPI still reached 6.2 percent.

Investors worried that the figures may trigger another hike in interest rates, or even stricter tightening measures from the financial authorities to curb inflation and asset bubbles.

Meanwhile, there are reports that from next year, residents should report their stock investment gains to local tax institutions if it is over 120,000 yuan. This possible change, according to some investors, may be the prelude of tax imposition upon stock earnings.

In a related move, PetroChina, the nation's largest oil producer, today announced the price range of its A-share Initial Public Offering (IPO) is set at 15 to 16.7 yuan per share.

Backed by domestic investors, the oil giant will probably break the IPO record on the Chinese mainland. To participate in its potentially lucrative online subscription on October 26, investors have to sell their stocks a day earlier for cash, which also contributed to today's plunge.

However, market watchers say it is unwise for investors to be completely pessimistic about China's equity market simply due to the recent correction, as the rosy prospect of the economy, as well as corporate earnings has not changed.

(China Daily October 26, 2007)