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Heavyweights drop in Shanghai on US debt issue
By Lydia Chen |
July 28, 2011, Thursday
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Online Edition
Online Edition
SHANGHAI benchmark stock index fell for the first time in three days as bluechips lost ground following shares in the US market plunged yesterday as the country edged closer to defaulting on its debt.
The Shanghai Composite Index lost 0.54 percent to 2,708.78. Turnover fell slightly to 90.45 billion yuan (US$14.02 billion) from yesterday's 92 billion yuan.
Heavyweights such as cement makers and banks stayed flat. But PetroChina, one of the biggest market heavyweights, helped recover part of market losses within the last half hour of trading.
Fujian Cement Co shed 3.50 percent to 14.08 yuan. Industrial & Commercial Bank of China, the country's biggest lender, lost 1.87 percent to its five month low of 4.20 yuan. PetroChina, China's largest oil producer, edged up 0.56 percent to 10.79 yuan.
The price of cement fell 0.53 percent last week from a week earlier, or 40 to 50 yuan per ton across the country, the fifth consecutive week it has seen a drop, according to Digital Cement, the industry association's website.
Analysts with Huatai Securities said the falling price was a result of seasonal declined demands in summer times as construction projects usually have to slow their work pace in hot weathers.
The mainland market is now in its passage to a double dip as investors are increasingly concerned about the impacts of the US debt ceiling crisis, China's slowing economy and local governments' massive debts, Zhang Min, an analyst with Galaxy Securities Co, said.
"Chinese lenders will be greatly affected in the next three years as many of the loans to local governments are expected due from this year till 2013," Zhang said.
"The possibilities of bad loans could severely hobble the banking sector as well as the broad economy," Zhang added. "Lenders will have to turn to the capital markets to raise large sums of money if they want to solve their problems."
"This is bad for investors and the market since banking sector is the pillar plays to support the market," he noted.
China yesterday ordered banks not to roll over or renew their loans to local governments' financing vehicles and to increase oversight of loans to the red-hot real estate sector, Liu Mingkang, chairman of the China Banking Regulatory Commission, told a meeting.
"We must reduce existing risks and strictly rein in new risks," Liu said.
Meanwhile, stalled US debt ceiling talks also cast a shadow over the prospects of China, which holds most of its overseas assets in US dollars.
The Dow Jones industrial average yesterday fell 1.6 percent, its biggest one-day drop since early June. It has fallen for four days straight. The S&P 500 fell 2 percent while the technology-focused Nasdaq composite index fell 2.6 percent, its worst day in five months.
The Shanghai Composite Index lost 0.54 percent to 2,708.78. Turnover fell slightly to 90.45 billion yuan (US$14.02 billion) from yesterday's 92 billion yuan.
Heavyweights such as cement makers and banks stayed flat. But PetroChina, one of the biggest market heavyweights, helped recover part of market losses within the last half hour of trading.
Fujian Cement Co shed 3.50 percent to 14.08 yuan. Industrial & Commercial Bank of China, the country's biggest lender, lost 1.87 percent to its five month low of 4.20 yuan. PetroChina, China's largest oil producer, edged up 0.56 percent to 10.79 yuan.
The price of cement fell 0.53 percent last week from a week earlier, or 40 to 50 yuan per ton across the country, the fifth consecutive week it has seen a drop, according to Digital Cement, the industry association's website.
Analysts with Huatai Securities said the falling price was a result of seasonal declined demands in summer times as construction projects usually have to slow their work pace in hot weathers.
The mainland market is now in its passage to a double dip as investors are increasingly concerned about the impacts of the US debt ceiling crisis, China's slowing economy and local governments' massive debts, Zhang Min, an analyst with Galaxy Securities Co, said.
"Chinese lenders will be greatly affected in the next three years as many of the loans to local governments are expected due from this year till 2013," Zhang said.
"The possibilities of bad loans could severely hobble the banking sector as well as the broad economy," Zhang added. "Lenders will have to turn to the capital markets to raise large sums of money if they want to solve their problems."
"This is bad for investors and the market since banking sector is the pillar plays to support the market," he noted.
China yesterday ordered banks not to roll over or renew their loans to local governments' financing vehicles and to increase oversight of loans to the red-hot real estate sector, Liu Mingkang, chairman of the China Banking Regulatory Commission, told a meeting.
"We must reduce existing risks and strictly rein in new risks," Liu said.
Meanwhile, stalled US debt ceiling talks also cast a shadow over the prospects of China, which holds most of its overseas assets in US dollars.
The Dow Jones industrial average yesterday fell 1.6 percent, its biggest one-day drop since early June. It has fallen for four days straight. The S&P 500 fell 2 percent while the technology-focused Nasdaq composite index fell 2.6 percent, its worst day in five months.
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