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China stocks fell over 1 per cent on Friday and were headed for a fifth straight session of losses, dragged by financials after the banking and insurance regulator pushed for credit support to private companies. Hong Kong stocks also declined, tracking broader Asian markets, as investors braced for an interest rate hike by the US Federal Reserve in December.
By lunchtime, the Shanghai Composite index was down 1.3 per cent at 2,601.51. The blue-chip CSI300 index also lost 1.3 per cent. CSI300's consumer staples sector sub-index was down 0.7 per cent, the real estate index lost 0.88 per cent and the healthcare sub-index was lower by 0.86 per cent.
CSI300's financial sector sub-index eased 2.13 per cent after Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, had said on Thursday banks must allocate at least a third of their new loans to private companies, and they should not simply withdraw loans from companies facing difficulties in repayment.
“Banks have undergone deleveraging for quite some time,” said Cao Xuefeng, head of research at Huaxi Securities in Chengdu. ”The market is worried that banks' non-performing loan ratios will go up if, on top of that, they need to lend more to businesses that are facing difficulties.”
“Markets are quite sensitive to statements like these, especially after the recent pledged shares problems,” said Steven Leung, sales director at brokerage UOB Kay Hian in Hong Kong. ** The smaller Shenzhen index was down 0.4 per cent and the start-up board ChiNext Composite index was weaker by 0.3 per cent.
Investors have been worried that the launch of a new board for tech companies this week, announced by Chinese President Xi Jinping on Monday, will disrupt the valuation structure of the market, said Cao. These concerns mounted after Fang Xinghai, deputy head of the securities regulator, had said on Wednesday the regulator would quickly implement Xi's plan for a new board, Cao added.
Tracking losses in broader Asian markets, Hong Kong stocks fared worse than those in the mainland. The Hang Seng Index was down 2.4 per cent at 25,601.15. Chinese H-shares listed in Hong Kong fell 2.7 per cent to 10,419.5.
Around the region, MSCI's Asia ex-Japan stock index was weaker by 1.5 per cent, while Japan's Nikkei index was down 0.9 per cent, after the Fed's statement overnight showed that the central bank appeared poised to deliver another interest rate hike next month.
Technology stocks led the slide. Hang Seng's IT sector lost as much as 4 per cent, before ending Friday's morning session down 3.8 per cent. Apple supplier AAC Technologies Holdings Inc , the biggest loser in the Hang Seng, lost 4.8 per cent, after Jefferies cut its price target. Tencent Holdings was down about 4 per cent.
The yuan was quoted at 6.9469 per US dollar, 0.19 per cent weaker than the previous close of 6.934. ** So far this week, the Shanghai stock index is down 2.8 per cent, while China's H-share index is down 2.5 per cent. At current levels, the Hang Seng is on track to lose 3.3 per cent this week. As of 04:19 GMT, China's A-shares were trading at a premium of 18.1 per cent over the Hong Kong-listed H-shares.
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