China shares hit 6-month low after holiday, Hong Kong sinks too

Thu Jun 13, 2013 5:46am BST

Related Topics

* HSI -2.7 pct, H-shares -3.7 pct, CSI300 -3.5 pct

* China indexes break below chart support in rising volumes

* Beijing unlikely to waver from policy positions: official media

* Merchants Bank set for worst A-share daily loss since Nov 2008

By Clement Tan

HONG KONG, June 13 (Reuters) - China shares tumbled to six-month lows on Thursday, weighing on Hong Kong stocks, rocked by soft economic data and a sell-off in global markets triggered by worries central banks will taper stimulus.

Official Chinese media reported on Thursday that Beijing was likely to maintain its policy position despite lackluster growth, hitting the market across various sectors from banks to technology, standout outperformers this year.

By midday, the CSI300 of the leading Shanghai and Shenzhen A-share listings was down 3.5 percent, while the Shanghai Composite Index slid 3.1 percent. Both were languishing at their respective lowest levels since December.

Losses on Thursday led both onshore Chinese benchmarks to break through chart support at previous 2013 lows in April and May, suggesting more losses may be imminent in the short term. China markets reopened on Thursday after the three-day Dragon Boat Festival holiday.

The Hang Seng Index was down 2.7 percent at 20,782.2 points, its lowest since September. The China Enterprises Index of the top Chinese listings skidded 3.7 percent, set for an eleventh-straight daily loss.

Hong Kong markets were also shut on Wednesday for the Dragon Boat Festival. Over the week, global investors had readjusted their positions in anticipation of a tapering of U.S. monetary stimulus.

Losses in Hong Kong on Thursday came as turnover spiked, but midday volumes in Shanghai were well off highs despite improving from last week's anemic levels.

The Chinese central bank injected funds after money rates jumped last week amid tight money conditions, leading mainland stock markets to their first weekly loss in six.

"It's not looking too good in the Chinese stock markets, but the volumes look a bit weak, suggesting this is not quite a panic-induced sell-off," said Zhang Qi, a Shanghai-based analyst with Haitong Securities.

"There are several negative triggers on the day, including weak economic data, reports that the A-share IPO approvals could resume as soon as July and of course, the money market situation," Zhang added.

China had published draft rules late last Friday to improve the transparency and pricing of initial public offerings in domestic stock markets, a move that could signal a resumption in new listing approvals after a seven-month hiatus.

Shenzhen shares of China Vanke, the mainland's largest property developer by sales, are set for their worst day in three months after sliding 3.8 percent. The Economic Information Daily reported on Thursday that home sales in major Chinese cities unexpectedly declined during the three-day holiday.

Prada dived 6.8 percent to a one-month low in Hong Kong after the Italian luxury brand posted pedestrian quarterly earnings that saw growth in its smaller brands lag the performance of its eponymous fashion label.

DATA SINKS CHINA BANKS

Chinese banks were hit by data that showed weaker new loans were extended in May than expected. Mid-sized bank China Merchants Bank dived 4.4 percent in Shanghai, headed for its worst daily loss since November 2008. Its Hong Kong listing shed a more modest 2.4 percent.

M2 money supply rose 15.8 percent in May from a year earlier, slightly below a median forecast of 15.9 percent, while total social financing, a broad measure of cash in the economy, was 1.19 trillion yuan versus 1.75 trillion yuan in April.

China's National Audit Office, responsible for overseeing state finances, warned of rising local government debt. In a report on Monday, total debt at 36 local governments had risen 13 percent to stand at 3.85 trillion yuan ($627.70 billion) at the end of 2012 from two years before.

On the year, the Hang Seng Index is now down more than 8 percent, while the China Enterprises Index has tumbled 16 percent. The CSI300 has shed a more modest 5 percent, and the Shanghai Composite Index is down almost 6 percent.

MSCI index managers said on Wednesday that shares listed in onshore China markets could rise to 30 percent on MSCI emerging equity indexes, double current levels, a move that could attract more institutional interest, further supporting the A-share market.

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