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China banks, developers drag HK shares lower, Shanghai up
March 1, 2012 / 5:31 AM / 6 years ago

China banks, developers drag HK shares lower, Shanghai up

(Updates to midday)

* HSI down 0.4 pct, Shanghai Composite up 0.1 pct

* China developers slump after Country Garden fundraising move

* China banks down, Feb lending possibly lower than expected

* Shanghai midday turnover at month low

By Clement Tan

HONG KONG, March 1 (Reuters) - Hong Kong shares slipped on Thursday, underperforming Asian peers on weakness in Chinese banks and developers on fears of more capital-raising in those sector after reports that bank lending in February was lower than expected.

Relative strength in small and medium-sized companies helped mainland Chinese markets eke out moderate gains by midday, with the Shanghai Composite Index up 0.1 percent with midday A-share turnover at the lowest in a month.

The China Enterprises Index of the top mainland listings in Hong Kong slipped 0.59 percent. The broader Hang Seng Index was down 0.49 percent at 21,574.5 at midday after trading in a narrow 100-point range all morning.

“Funding pressures will check the steep gains in the share prices of Chinese developers in the near term,” Alan Lam, Greater China equity analyst at Julius Baer, told Reuters. “Bank lending in China is down but funding demand probably remains strong in sectors that the government is trying to quell.”

Country Garden Holdings Co Ltd, the mainland’s fifth-largest property developer by sales value, led percentage losses in the sector, slumping 7.7 percent in midday volume that was more than 40 times its 30-day average.

Country Garden said on Thursday that it would raise HK$2.14 billion ($275 million) to fund capital expenditure by selling new shares to controlling shareholder Concrete Win Ltd, a move that put its sector peers under pressure.

China Overseas Land & Investment Ltd slid 4.7 percent, while Longfor Properties Co Ltd lost 6.4 percent.

Fundraising fears also hit Chinese banks after mainland media reported that Industrial Bank Co Ltd aimed to raise at least 25 billion yuan ($3.97 billion) by selling new shares to institutional investors.

Trading in Industrial Bank shares has been suspended since Feb. 28.

Mainland media reports on Thursday followed a Reuters report on Wednesday that new yuan loans by Chinese banks may total about 500 billion yuan ($79.45 billion) in February, well below market expectations of 650 billion yuan.

If the estimate is accurate, it would mark the second straight month in which new loans fell short of expectations. New loans in January were 738 billion, below expectations of 1 trillion.

Agricultural Bank of China Ltd fell 1 percent, while larger peers, Bank of China Ltd shed 0.6 percent, Industrial and Commercial Bank of China Ltd slipped 0.2 percent, and China Construction Bank Corp was down 0.3 percent.

SMALL CAP STRENGTH HELPS SHANGHAI

In Shanghai, the CSI500 Index, a gauge of small and medium-sized companies, was a relative outperformer, up 0.7 percent and suggesting mainland investors were betting on more government support for the sector.

Shanghai Belling Co Ltd bolstered both the CSI500 and Shanghai Composite, gaining a maximum 10 percent at midday to the highest since last August.

A private-sector report on Thursday portrayed a picture of smaller companies lagging the rebound depicted in a government survey that showed China’s factories grew more than expected in February.

With the focus turning towards this year’s National People’s Congress meetings that will start over the weekend for fresh policy cues, Julius Baer’s Lam said hopes for monetary policy easing could be hurt with Beijing looking like it would be comfortable with a lower target, possibly below 8 percent. (Editing by Chris Lewis)

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