Friday, August 28, 2009
HK stocks drop
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By Parvathy Ullatil & Claire Zhang
HONG KONG, Aug 28 (Reuters) - Shares in China sank 2.9 percent on Friday, taking Hong Kong stocks down with them, led by banks after reports that August lending in China may drop sharply, trimming liquidity flowing into the market.
China's banking regulator had given banks verbal instructions that they must not rush into end-of-the-month lending as August draws to a close, bankers at several lenders told Reuters on Friday. [ID:nSHA304109]
Chinese banks have lent around 200 billion yuan ($29 billion) so far this month, with the four biggest state-owned banks lending around 100 billion yuan, bankers said.
If lending in August continues at this level, it will lag far behind the 360 billion yuan reported in July and a monthly average of more than 1 trillion yuan recorded for the first six months of this year.
"The market had expected lending to fall in August but not so sharply," said senior economist He Zhicheng at Agricultural Bank of China in Beijing.
"Such a drop will surely weigh on the stock market, with the index possibly testing a low (for this year) for a second time," he said.
FOURTH STRAIGHT WEEKLY DROP
The Shanghai Composite Index .SSEC closed down 85.707 points at 2,860.688, posting a 3.38 percent loss for the week.
On Aug. 19, it touched a low for this year of 2,761 points after a two-week market slump driven partly by worries over liquidity.
Losing Shanghai A shares outnumbered gainers 762 to 117 while turnover for Shanghai A shares dropped to one-week low of 133 billion yuan from Thursday's 145 billion yuan.
"The index may test its 125-day moving average (now at 2,750 points) as it appears to need to seek a fresh floor," said Tang Yonggang, chief strategist at Hongyuan Securities in Beijing. He added that the market's consolidation period might last longer than previously expected.
But many other analysts still believed that the index would generally move in a narrow range between 2,800 and 3,000 points in the near term, reasoning that the slump this month had washed out most of the profit-taking pressure accumulated during the market's 90-percent surge earlier this year.
Posted by Shakeel at 11:20 PM
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