HK stocks plunge on reserve move
By Sui-Lee Wee and Lu Jianxin |
January 14, 2010, Thursday
|
Print Edition
Print Edition
SHARES in Hong Kong fell nearly 3 percent yesterday, led by banks and property stocks, as investors fretted the Chinese mainland's surprise reserve requirement increase could cool growth in the world's third-largest economy.
Hong Kong's benchmark Hang Seng Index fell 2.59 percent or 578.04 points at 21,748.6, its worst one-day percentage loss in six weeks.
Market turnover increased to HK$97.62 billion (US$12.59 billion), the highest since November 27, from Tuesday's HK$81.22 billion.
The decision by the People's Bank of China on Tuesday to increase bank reserve requirements could signal an end to easy and cheap funding, putting pressure on the earnings of Chinese property and resources companies.
The surprise move is the strongest step to date by the central bank as it starts to normalize monetary policy from very loose conditions, with an eye toward reining in surging asset prices.
"This is the first reaction from the mainland on the bubble forming," said Jackson Wong, investment manager at Tanrich Securities. "The impact is pretty big this time, but the mainland has been working hard to maintain its economic growth. They won't want to derail it."
The reserve requirement rise came earlier than most traders and analysts had expected, and was accompanied by an official campaign to keep asset prices in check, in part by approving more initial public offerings.
Chinese banks fell, with the Industrial and Commercial Bank of China, the world's largest lender by market capitalization, extending early losses. Its Hong Kong shares declined 3.58 percent to finish at three-month lows.
China Construction Bank also hit a three-month low, shedding 3.89 percent in Hong Kong, while the Bank of China lost 3.62 percent to a three-week low.
Property stocks, a sector that has become an increasing focus of the mainland's efforts to stamp out runaway price rises, also dropped as an official vowed renewed attempts to curb speculation.
China Overseas Land fell 4.73 percent to a four-month low, and China Resources Land dropped 6.59 percent to a six-month low.
But analysts said extended steep sell-offs of banks and property issues were unlikely, adding that the stocks would possibly consolidate at current levels. Some also said the PBOC move could help to stabilize the banking system.
"I do think they are reasonably priced right now (at 12-14 times P/E). But since the mainland is indicating that they are tightening up, I don't think the banks will make a big run-up anytime soon," Wong said.
Other sectors pegged tightly to China's economic growth and building boom, such as resources, also took a hit. Aluminum Corp of China Ltd, the country's largest aluminium maker, dropped 7.03 percent.
China Shenhua Energy, the nation's largest coal producer, slipped 3.54 percent.
Hong Kong's benchmark Hang Seng Index fell 2.59 percent or 578.04 points at 21,748.6, its worst one-day percentage loss in six weeks.
Market turnover increased to HK$97.62 billion (US$12.59 billion), the highest since November 27, from Tuesday's HK$81.22 billion.
The decision by the People's Bank of China on Tuesday to increase bank reserve requirements could signal an end to easy and cheap funding, putting pressure on the earnings of Chinese property and resources companies.
The surprise move is the strongest step to date by the central bank as it starts to normalize monetary policy from very loose conditions, with an eye toward reining in surging asset prices.
"This is the first reaction from the mainland on the bubble forming," said Jackson Wong, investment manager at Tanrich Securities. "The impact is pretty big this time, but the mainland has been working hard to maintain its economic growth. They won't want to derail it."
The reserve requirement rise came earlier than most traders and analysts had expected, and was accompanied by an official campaign to keep asset prices in check, in part by approving more initial public offerings.
Chinese banks fell, with the Industrial and Commercial Bank of China, the world's largest lender by market capitalization, extending early losses. Its Hong Kong shares declined 3.58 percent to finish at three-month lows.
China Construction Bank also hit a three-month low, shedding 3.89 percent in Hong Kong, while the Bank of China lost 3.62 percent to a three-week low.
Property stocks, a sector that has become an increasing focus of the mainland's efforts to stamp out runaway price rises, also dropped as an official vowed renewed attempts to curb speculation.
China Overseas Land fell 4.73 percent to a four-month low, and China Resources Land dropped 6.59 percent to a six-month low.
But analysts said extended steep sell-offs of banks and property issues were unlikely, adding that the stocks would possibly consolidate at current levels. Some also said the PBOC move could help to stabilize the banking system.
"I do think they are reasonably priced right now (at 12-14 times P/E). But since the mainland is indicating that they are tightening up, I don't think the banks will make a big run-up anytime soon," Wong said.
Other sectors pegged tightly to China's economic growth and building boom, such as resources, also took a hit. Aluminum Corp of China Ltd, the country's largest aluminium maker, dropped 7.03 percent.
China Shenhua Energy, the nation's largest coal producer, slipped 3.54 percent.
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