Index slips to lowest in over 4 months
By Lydia Chen |
June 3, 2011, Friday
|
Print Edition
Print Edition
SHANGHAI'S benchmark index yesterday fell to the lowest in more than four months as banks tumbled over investor concerns that the risks of bank debt in China may worsen.
The Shanghai Composite Index dropped 1.4 percent to 2,705.18, the lowest close since January 25.
Financial and property shares declined as investors became cautious over how the sectors would be affected by a government plan to restructure local government debt.
The Industrial and Commercial Bank of China shed 0.9 percent to 4.44 yuan. Smaller banks, which are more susceptible to government policies, posted bigger losses than the country's "big four" banks. China Everbright Bank lost 3.7 percent to 3.40 yuan.
China plans to shift as much as 3 trillion yuan of debt from local governments, reducing the possibility of defaults that could threaten stability, Reuters reported, citing unidentified source.
The central government will pay off some local debt and make state-owned banks write off some bad loans, it said.
Bloomberg News also reported yesterday that China's massive plan to rein in property prices by building a record number of homes may worsen the risk of bank debt.
China aims to build 36 million low-cost homes by 2015, which may see 2 trillion yuan added to local government borrowing by 2012, bringing it to a total of 12 trillion yuan, according to Standard Chartered Plc estimates. The surge of loans to local authorities may spark a wave of bank bailouts that may crimp economic growth.
The Shanghai Composite Index dropped 1.4 percent to 2,705.18, the lowest close since January 25.
Financial and property shares declined as investors became cautious over how the sectors would be affected by a government plan to restructure local government debt.
The Industrial and Commercial Bank of China shed 0.9 percent to 4.44 yuan. Smaller banks, which are more susceptible to government policies, posted bigger losses than the country's "big four" banks. China Everbright Bank lost 3.7 percent to 3.40 yuan.
China plans to shift as much as 3 trillion yuan of debt from local governments, reducing the possibility of defaults that could threaten stability, Reuters reported, citing unidentified source.
The central government will pay off some local debt and make state-owned banks write off some bad loans, it said.
Bloomberg News also reported yesterday that China's massive plan to rein in property prices by building a record number of homes may worsen the risk of bank debt.
China aims to build 36 million low-cost homes by 2015, which may see 2 trillion yuan added to local government borrowing by 2012, bringing it to a total of 12 trillion yuan, according to Standard Chartered Plc estimates. The surge of loans to local authorities may spark a wave of bank bailouts that may crimp economic growth.
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