* HSI -1.1 pct, H-shares -2 pct, CSI300 -3.1 pct
* China banks slump after regulator orders more checks on
* State Council pledges to further liberalise interest rates
* Chalco dives after 2012 earnings underwhelm
By Clement Tan
HONG KONG, March 28 China shares were headed for
their worst loss in nearly a month on Thursday, hurting Hong
Kong markets, with banks taking a hit after they were ordered to
tighten control over wealth management products (WMP) and
The move is China's latest in warding off potential risks to
the financial system and comes after an instrument sold through
Hua Xia Bank failed to pay its annualised return
while China's CITIC Trust announced payment delay on its product
late last year.
Banks were also under pressure after China's cabinet said it
will unveil new measures to further liberalise interest rate and
exchange rate markets later this year, stoking worries of an
erosion in banks' net interest margins.
At midday, the CSI300 of the leading Shanghai and
Shenzhen A-share listings was down 3.1 percent at 2,504.3, with
chart resistance next seen at the March 19 low at around 2,492.
The Shanghai Composite Index shed 2.6 percent.
The Hang Seng Index slid 1.1 percent to 22,214.6,
coming off its highest close since March 18 it set on Wednesday.
The China Enterprises Index of the top Chinese listings
in Hong Kong was down 2 percent.
Hong Kong markets are shut for a four-day Easter weekend
from Friday and will reopen on Tuesday. The territory's two
benchmarks are now up 0.4 and down 0.8 percent on the week,
"The timing of the announcement caught the market by
surprise, although people were already expecting the regulators
to act," said Hong Hao, chief strategist at Bank of
Communication International Securities.
"This is definitely not the lowest point of the market, I
won't be trading at all if I don't have to. It's not even worth
trying to catch a market rebound in the near term," Hong added.
Mid-sized Chinese banks were among the top drags on onshore
Chinese indexes. China Minsheng Bank dived 8.6
percent in Shanghai, cutting its 2013 gains to 22.6 percent.
Industrial Bank slumped 9.9 percent, while Hua Xia
Bank slid 6.9 percent.
In Hong Kong, Minsheng Bank tumbled 6.7 percent,
plumbing its lowest intra-day levels since mid-January.
The China Banking Regulatory Commission singled out risks of
investment in "informal debt assets", such as trust loans,
letters of credit, accounts receivable and bank acceptance
bills, among others, in a clutch of instruments that are broadly
categorised in China as "wealth management" products.
Banks are now required to keep investments in such assets at
no higher than 35 percent of total outstanding wealth management
products, or no more than 4 percent of their total assets -
whichever is the lower amount.
The aim is to bring these products back onto the balance
sheet of banks, making it easier to track and monitor risks.
"We expect large banks to have lower WMP/asset ratio as well
as less percentage of WMPs invested into non-standard credit
assets than mid-size joint-stock banks," said May Yan, Barclays'
top-rated China banking analyst, in a note on Friday.
More Chinese policy cues, but from the property sector,
could weigh on markets towards the end of the month as local
governments release details of property sector curbs that
Beijing first provided guidelines for at the start of March.
China Vanke shed 2.6 percent in Shenzhen, while
Poly Real Estate slid 2.5 percent in Shanghai and
China Overseas Land lost 2.1 percent.
The 21st Century Business Herald newspaper reported that
Shenzhen, a city in the southern Guangdong province, is likely
to raise minimum down payment for second homes from 60 to 70
percent from April with the minimum mortgage rates kept
These latest government moves come after China's "Big Four"
banks reported benign bad-loan ratios as brisk lending in
fast-growing regions countered souring loans to overheated
sectors on the country's east coast.
Shares of Industrial and Commercial Bank of China (ICBC)
, which was the last among the "Big Four" to
report their 2012 results on Wednesday, was down 2.4 percent in
Shanghai and 2.2 percent in Hong Kong.
According to Thomson Reuters StarMine, of the 76 percent of
Hong Kong-listed companies that have reported 2012 results, more
than half have missed expectations, with the energy and material
sectors accounting for the bulk of disappointments.
Sixty-seven percent of China-listed companies have reported,
with 72 percent missing expectations, with percentage
disappointments in the industrials, materials, information
technology and consumer staple sectors hovering around 80
Aluminum Corporation of China (Chalco)
dived 4.5 percent in Hong Kong and 4.1 percent in Shanghai after
its 2012 net profit still came in worse than expected despite
having earlier warned of a full-year loss in January.
China's industrial firms made total profits of 709.2 billion
yuan ($114.13 billion) in the first two months of 2013, up 17.2
percent from the same period of a year ago, the National Bureau
of Statistics said on Thursday.