Shanghai's benchmark stock index plummeted more than 4 percent yesterday and 492.6 billion yuan (US$72 billion) was wiped off the bourse value on the back of a plunge in global markets triggered by the Wall Street credit crisis.

The index dropped to a 22-month low and went under the psychological 2,000 barrier despite China's central bank cutting key lending rates and reserve requirements for smaller banks on Monday night in moves aimed to lift the domestic economy.

The Shanghai Composite Index dived 4.47 percent, or 93.04 points, to 1,986.64, after hitting an intra-day low of 1,974.39.

The index, at its lowest since November 17, 2006, is down more than two-thirds from its peak of 6,092.06 on October 16 last year.

In yesterday's trading, losses outnumbered gains 702 to 153, while 15 remained unchanged.

Turnover rose to 35 billion yuan, compared with 22.7 billion yuan last Friday.

The Shenzhen Composite Index, which tracks the smaller stock exchange on China's mainland, yesterday dropped 1.39 percent to 570.75.

"Domestic markets were also affected by comments from former United States Federal Reserve chief Alan Greenspan on the first trading day after the Mid-Autumn Festival holiday," said Shen Songfa, an analyst with China Galaxy Securities Research.

Greenspan described the credit turmoil as "once-in-a-century type of event" after the collapse of Lehman Brothers Holdings and Bank of America's takeover of Merrill Lynch & Co.

Financial companies led the Shanghai market down and most banks slumped by the 10-percent daily cap.

The Industrial and Commercial Bank plunged 9.95 percent to 3.80 yuan. China Construction Bank slid 9.94 percent to 4.26 yuan and China Merchants Bank dived 9.97 percent to 16.07 yuan.

Bucking the trend were the real-estate, transport and oil sectors, as crude prices fell below US$100 a barrel.

Poly Real Estate climbed 4.80 percent to 11.80 yuan and Huafa Industrial advanced 3.19 percent to 9.07 yuan.

China Petroleum and Chemical Corp advanced 1.78 percent to 9.13 yuan. China Cosco Holdings, the country's largest container line, added 1.82 percent to 12.86 yuan.

Asian markets were rocked yesterday. The Hong Kong Hang Seng Index retreated 5.49 percent to 18,289.82 points and the Nikkei 225 Stock Average dropped 5 percent to close at a 3-year low of 11,609.72 in Tokyo.

Wang Fen, a Shanghai Securities Co analyst, said: "Positive measures from policy makers could boost market confidence to some extent, but the market is still faced with challenges from lackluster surrounding markets and falling profits of listed companies."

(Shanghai Daily September 17, 2008)