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Banks lead Shanghai index lower on debt concern
By Lydia Chen |
June 2, 2011, Thursday
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Online Edition
Online Edition
SHARES in Shanghai closed lower today, giving up gains in previous two trading days as lenders slumped over investors' concerns that the country's bank debt risks may get worse.
The Shanghai Composite Index trimmed morning losses and traded 1.40 percent lower to close at 2,705.18. Turnover added slightly to 94.28 billion yuan (US$14.55 billion).
The losses were also partly due to falling stocks in the United States, which suffered their worst decline since last August on weak economic data, according to Zhang Min, an analyst with Galaxy Securities Co.
"The market may fall to 2,650 points, a technical support, in the next few days," Zhang said.
He also expected an interest rate hike around the upcoming three-day Dragon Boat Festival holiday starting this Saturday to Monday, which will also cast shadow on the market.
Financials and property were the biggest drags, with investors being cautious to bet their money given uncertainty over how the sectors will be affected by a government plan to restructure local government debt.
Industrial & Commercial Bank of China was down 0.89 percent to 4.44 yuan. Smaller banks, which are more susceptible to government policies, posted bigger losses than the "big four" banks. Ningbo Bank plunged 4.65 percent to 11.28 yuan.
China plans to shift as much as 3 trillion yuan of debt off local governments, reducing the possibility of defaults that could threaten stability, Reuters reported, citing unidentified people.
The central government will pay off some local debt and make state-owned banks write off some bad loans, it said.
Bloomberg also reported today that China's massive plan to rein in property prices with a record homebuilding program may worsen local debt risks.
Bucking the overall weak trend, steel and gold producers outperformed the market.
Inner Mongolia BaoTou Steel Union Co hiked the daily cap of 10 percent to 7.44 yuan. GF Securities Co said in a report that China's ongoing power shortage will pose little threat to the country's steel output.
Zhongjin Gold rose 1.65 percent to 33.23 yuan. Gold rose to four-week high yesterday in New York as US dollar slumped while US equities also declined, which boosted demands for the precious metal as an alternative asset.
The Shanghai Composite Index trimmed morning losses and traded 1.40 percent lower to close at 2,705.18. Turnover added slightly to 94.28 billion yuan (US$14.55 billion).
The losses were also partly due to falling stocks in the United States, which suffered their worst decline since last August on weak economic data, according to Zhang Min, an analyst with Galaxy Securities Co.
"The market may fall to 2,650 points, a technical support, in the next few days," Zhang said.
He also expected an interest rate hike around the upcoming three-day Dragon Boat Festival holiday starting this Saturday to Monday, which will also cast shadow on the market.
Financials and property were the biggest drags, with investors being cautious to bet their money given uncertainty over how the sectors will be affected by a government plan to restructure local government debt.
Industrial & Commercial Bank of China was down 0.89 percent to 4.44 yuan. Smaller banks, which are more susceptible to government policies, posted bigger losses than the "big four" banks. Ningbo Bank plunged 4.65 percent to 11.28 yuan.
China plans to shift as much as 3 trillion yuan of debt off local governments, reducing the possibility of defaults that could threaten stability, Reuters reported, citing unidentified people.
The central government will pay off some local debt and make state-owned banks write off some bad loans, it said.
Bloomberg also reported today that China's massive plan to rein in property prices with a record homebuilding program may worsen local debt risks.
Bucking the overall weak trend, steel and gold producers outperformed the market.
Inner Mongolia BaoTou Steel Union Co hiked the daily cap of 10 percent to 7.44 yuan. GF Securities Co said in a report that China's ongoing power shortage will pose little threat to the country's steel output.
Zhongjin Gold rose 1.65 percent to 33.23 yuan. Gold rose to four-week high yesterday in New York as US dollar slumped while US equities also declined, which boosted demands for the precious metal as an alternative asset.
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