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HK shares at 2-wk closing low; China stocks edge down

Published 07/08/2009, 05:14 AM
Updated 07/08/2009, 05:16 AM
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* China banks, properties slip on concern over policy changes

* China Unicom jumps on iPhone deal speculation

* Chinese brokerages gain on IPO talk (Updates to close)

By Parvathy Ullatil and Claire Zhang

HONG KONG, July 8 (Reuters) - Chinese bank stocks slipped in both the Hong Kong and the Shanghai markets on Wednesday as investors worried that China may reverse its easy monetary policies following a strong surge in new lending in the first half.

Senior regulators in China on Tuesday warned that the country's massive infrastructure lending was posing increasing risks for the banking system.

Bill and bond yields had been rising recently on signs that the central bank was starting to tighten its liquidity policy, with worries over a possible policy shift also weighing on the stock market, analysts in Shanghai said.

Industrial and Commercial Bank of China, Construction Bank and Bank of Communications all sagged by about 3 percent.

China Merchants Bank dropped 3.7 percent in Hong Kong and 1.9 percent in Shanghai. China's sixth-largest lender was planning a rights share offer to raise about $3 billion before year-end, as it seeks to boost its capital after overpaying for a recent acquisition, investment banking sources told Reuters on Wednesday.

CHINA PROPERTY PLAYS PULLBACK IN HONG KONG

The benchmark Hang Seng Index finished down 0.8 percent or 141.2 points at a two-week closing low of 17,721.07, falling for a third straight day as talk circulated about the need for a second round of stimulus spending in the United States, stoking fears the economy was not yet on the road to recovery.

Turnover rose to HK$57.1 billion from Tuesday's HK$50.7 billion.

Chinese property stocks fell on worries a clampdown on lending for second-home buyers in Hangzhou, aimed at cooling the property market, may spread to other major cities.

Banks in Hangzhou are required to strictly apply a 40 percent, up from 20 percent, down-payment rule for second home purchases after property prices in Hangzhou rose 20 percent over the past three months, Chinese newspapers reported.

China Overseas Land fell 2.9 percent, while Guangzhou R&F Properties gave up 5 percent. But analysts viewed the move as a temporary setback for the property sector.

"Words are still much louder than action as the government is still very anxious to safeguard the 8 percent GDP growth target," David Ng, Head of regional property research at RBS.

The China Enterprises Index, which represents top locally listed mainland Chinese stocks, fell 1 percent to 10,573.71.

China Unicom, the country's No.2 mobile service provider leapt for a second day, adding 5.1 percent as speculation mounted that it was close to signing a deal to launch Apple's iPhone handset in China.

Energy stocks continued to correct as oil fell towards $62 per barrel on Wednesday, on course for its sixth consecutive fall and the longest losing streak since mid-December, after data showed larger-than-expected builds in U.S. products stocks, reflecting little sign of a recovery in oil demand.

Asia's largest oil and gas producer PetroChina was down 2.3 percent in Hong Kong, while its Shanghai-listed shares dropped 1.6 percent to 14.59 yuan.

BROKERAGES JUMP ON IPO TALK IN CHINA

The Shanghai Composite Index ended at 3,080.774 points, well off its intraday low of 3,011.214 helped by property and brokerage shares.

But gaining Shanghai A shares outnumbered losers by 564 to 343, while turnover for Shanghai A shares dropped to 170.2 billion yuan ($24.9 billion) from Tuesday's 187.6 billion yuan.

Brokerages surged due to a late buying spree on market talk of an IPO from Everbright Securities or China Merchants Securities. Both Guoyuan Securities and Northeast Securities jumped more than 9 percent.

China Daily cited sources as saying that China State Construction Engineering Corporation (China Construction), the country's largest home builder, would be listed in Shanghai next month, in what would be the market's biggest IPO this year.

Domestic media, including the International Finance News, on Wednesday reported that the China Securities Regulatory Commission was carrying out checks on details of mutual fund trades and sales.

Analysts said the checks were linked to news that Beijing-based China Asset Management Co, the country's biggest fund firm, had reported strong demand for a new index fund. The fund had already attracted over 10 billion yuan on Monday on its first day of subscriptions.

"Hot fund sales seem to recall 2007's bull run. Concerns over recent large rises in the index, plus weak overseas markets, triggered profit-taking," said Haitong Securities analyst Zhang Qi.

The property sector was strong, with Poly Real Estate Group rising 4.11 percent to 29.88 yuan after saying it had signed contracts worth 6.3 billion yuan in June, up 51 percent on the previous month, according to Reuters' calculations.

Steel shares were mixed, with Baoshan Steel edging up 0.12 percent to 8.03 yuan.

Chinese Business News cited informed sources on Wednesday as saying China's steel mills had agreed to a 33 percent cut in iron ore prices after failing to win a bigger reduction than their Asian rivals, but only for a six-month period rather than a full year.

Although the report pointed to a failure to seal a better deal, steel demand was still strong, so the sector's stocks were not expected to be hit hard, analysts said.

For technical analysis on the HSI and SSEC click on http://www.reutersindia.net (Additional reporting by Alison Leung; Editing by Ben Blanchard and Chris Lewis)

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