Stock markets decline amid PBOC tightening, disappointing data

Stock markets in the Chinese mainland saw a weekly fall last week, amid disappointing manufacturing data and a move by the central bank to tighten liquidity.

The benchmark Shanghai Composite Index fell by 25.09 points or 1.17 percent to 2,113.69 points on Friday. The index ended the week 2.16 points or 0.1 percent lower than the previous week.

The Shenzhen Component Index fell on Friday by 91.56 points or 1.17 percent to 7,850.56 points, falling by 133.2 points or 1.69 percent from February 14.

Combined turnover on the two bourses on Friday was 232.81 billion yuan ($40.51 billion), declining from the previous trading day's 298.22 billion yuan.

Last week, the People's Bank of China (PBC), the central bank, drained funds by selling bond repurchase (repo) contracts on Tuesday and Thursday, the first time since June 2013 that the PBC had used repos to drain liquidity from the market.

On Thursday, weak factory activity data also demoralized investors. The flash HSBC/Markit China Manufacturing Purchasing Managers' Index for February fell to a seven-month low of 48.3 from January's final reading of 49.5. A number below 50 indicates contraction, while one above 50 indicates expansion.

The oil sector was one of the stronger performers after Sinopec, China's leading petroleum refiner and oil producer, said late on Wednesday that it would allow private capital to invest in its oil retail unit.

The move, seen as an attempt to change its ownership structure and break the monopoly of State-owned enterprises, boosted investors' expectations for reforms in other State-owned oil, gas and coal companies.

Investors are now turning their eyes to the upcoming annual National People's Congress and the Chinese People's Political Consultative Conference - the two sessions - which are scheduled to be held in early March in Beijing.

Sectors such as national security, envrionmental protection and energy gained strongly last week as investors hope for announcements of reforms and policy support for the sectors during the two sessions.

ChiNext, China's NASDAQ-style board for high-tech and fast-growing start-ups listed in Shenzhen, gained slightly on Friday by 4.51 points or 0.30 percent to 1,519.67 points.

The index saw a weekly gain of 3.88 points or 0.26 percent from February 14.