Mainland stock markets keep falling amid liquidity concerns

Stock markets in the Chinese mainland fell by more than 2 percent on Friday, with a weekly loss of more than 5 percent amid concerns over liquidity.

The benchmark Shanghai Composite Index fell for a ninth consecutive day, falling by 43.00 points or 2.02 percent to close at 2,084.79 points on Friday. The index finished 5.07 percent lower than the previous Friday.

The Shenzhen Component Index declined by 180.99 points or 2.22 percent to 7,966.72 points on Friday, ending the week 5.49 percent lower than on December 13.

Combined turnover on the two bourses on Friday was 153.5 billion yuan ($25.28 billion), up from Thursday's 140.0 billion yuan.

The decline on Friday came despite an injection of liquidity by the People's Bank of China, which said on Thursday that it had injected fresh funds into selected lenders via short-term liquidity operations.

One of the main trends last week was the sharp rise in borrowing rates in the Chinese money market. All terms of the Shanghai Interbank Offered Rate (Shibor), a measure of China's interbank lending rate, have spiked since Monday, with the seven-day Shibor hitting 7.65 percent on Friday, the highest since June.

The seven-day repurchase rate (repo), a gauge of liquidity in the financial system, also climbed to a six-month high of 7.6 percent on Friday.

Meanwhile, the US Federal Reserve announced Wednesday that it would start to pull back from its $85 billion-a-month quantitative easing program, triggering concerns about a possible outflow of funds from Asia.

Worries over a shortage of liquidity in the money market pressured financial stocks on Friday. China CITIC Bank Co declined by 8.67 percent to 3.58 yuan on Friday while China Construction Bank Corp fell by 6.16 percent to 3.96 yuan.

The price of gold hit $1,187 an ounce Friday, the lowest since June, weighing on Chinese gold firms. Shandong Gold Mining Co and Hubei Eastern Gold Jade Co both fell by more than 5 percent on Friday, to 17.44 yuan and 17.35 yuan respectively.

Meanwhile, medicine and agricultural sectors outperformed on Friday. Chongqing Lummy Pharmaceutical Co rose by 8.86 percent to 27.04 yuan while crop seeds developer Wang-xiang Doneed Co jumped by the daily limit of 10 percent to 10.89 yuan.

ChiNext, China's NASDAQ-style board for high-tech and fast-growing start-ups listed in Shenzhen, slid by 2.37 points or 0.19 percent to 1,253.71 points, with a weekly loss of 1.91 percent from the previous Friday.