China shares tumble on liquidity fears - Overshadows CSCE debut in Shanghai

China shares tumble on liquidity fears - Overshadows CSCE debut in Shanghai
By Lindsay Whipp in Tokyo and Dave Shellock in London
Copyright The Financial Times Limited 2009
Published: July 29 2009 08:00 | Last updated: July 29 2009 08:27
http://www.ft.com/cms/s/0/6a1c0a60-7c0d-11de-a7bf-00144feabdc0.html


Chinese stocks suffered their worst one-day fall for eight months amid fears that the country’s central bank might take steps to curb liquidity.

The Shanghai Composite index settled 5 per cent lower to 3,266.43, having been down 7.7 per cent at one stage, bringing a five-day rally juddering to a halt. Turnover in A shares reached a record high.

Prior to yesterday’s decline, the benchmark index had risen nearly 90 per cent since the start of the year to its highest level for 14 months on the back of strong measures to stimulate the economy and a surge in bank lending.

Local reports yesterday claimed that China’s two biggest state-owned commercial banks, Industrial and Commercial Bank of China (ICBC) and China Construction Bank (CCB), had capped their 2009 lending targets, triggering concerns about the country’s economic recovery.

ICBC shares fell 2.1 per cent in Hong Kong to HK$5.57 and CCB shed 1.4 per cent to HK$6.17. In Shanghai, Bank of China fell 3 per cent to Rmb4.46. Mainland property stocks also came under severe pressure, with China Vanke sliding 7.3 per cent to Rmb13.20.

Fears that China’s credit growth might be choked off overshadowed a stellar market debut by China State Construction Engineering. The company, which raised Rmb50.2bn in the world’s biggest initial public offering for more than year, saw its shares rise 56 per cent to Rmb6.53 from the Rmb4.18 offering price.

The retreat on the mainland sent the Hang Seng index in Hong Kong sliding 2.4 per cent to 20,135.50 and undermined other markets across the region.

In Taipei, the weighted index shed 0.8 per cent to 7,083.63, its biggest fall for two weeks, the Straits Times index in Singapore fell 0.8 per cent to 2,604.06 and Seoul’s Kospi eased 0.1 per cent to 1,524.32. In Australia, the S&P/ASX 200 index eased 0.6 per cent to 4,142.8.

But Tokyo inched higher, helped by encouraging earnings from Yahoo Japan, which helped lift other Internet-related shares.

The Nikkei 225 Average closed 0.3 per cent higher at 10,113.24, while the broader Topix was little changed, up just 0.02 per cent at 930.36.

Yahoo Japan said it expected net income to rise as much as 8.3 per cent in the six months to September, pushing its shares up 7 per cent to Y33,100.

SoftBank, which owns 40.95 per cent of Yahoo Japan, gained 4.4 per cent to Y1,998. The news helped lift other internet-related stocks, with Rakuten, an online shopping mall, rising 1.2 per cent to Y61,200 on the Jasdaq market.

It was not enough to help shares of DeNA, an online shopping and auction site operator, after it said first-quarter net income dropped 25.6 per cent, causing its shares to slide 9.1 per cent to Y289,900.

Nippon Steel lost 3.5 per cent to Y364 after the company widened its loss forecast for the six months ending September, having completed price negotiations for product and material prices.

Daido Steel’s shares dropped 6.7 per cent to Y389 after the company reported a quarterly loss of Y11.98bn.

Hitachi’s shares remained in focus, regaining ground after Tuesday’s earnings that caused the shares to drop. An analyst upgrade helped the stock rally 5.1 per cent to Y308.

Mumbai was hit by disappointing earnings from several blue-chip companies and the BSE Sensex index declined 1 per cent to 15,173.46.