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Shanghai index dips on default fears
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SHANGHAI stocks retreated today, dragged by property developers and financial firms, amid worry that an insolvent Zhejiang real estate company may trigger widespread defaults.
The benchmark Shanghai Composite Index lost 0.17 percent to settle at 2,021.73. Daily turnover was 79 billion yuan (US$13 billion).
“Investors grew more cautious as the defaulting developer fuelled concerns about an outbreak of credit defaults in the second quarter, the peak period for debt repayment,” Hongyuan Securities said in a note today.
The People’s Bank of China denied a media report that it joined emergency talks about whether to bail out the debt-ridden Zhejiang Xingrun Real Estate Co, the bank said on its Weibo microblog yesterday.
Reports said the unlisted Zhejiang Xingrun is unable to repay 3.5 billion yuan of debts, including 2.4 billion yuan of loans from 19 commercial banks.
The case added to worries about more credit defaults in China after Shanghai Chaori Solar Energy Science & Technology Co, a solar cell maker, failed to pay 89.8 million yuan in loan interests early this month.
Yu Cheng, analyst with Northeast Securities, said the market also worried about liquidity outlook as the central bank showed no signs of monetary easing.
The central bank yesterday continued to withdraw cash from the financial system, draining 100 billion yuan via 28-day repurchase agreements, according to a statement on its website.
The seven-day Shanghai Interbank Offered Rate, a gauge of funding costs, rose 54 basis points to 3.4 percent, data from the National Interbank Funding Center showed.
Poly Real Estate fell 1.6 percent to 6.77 yuan. Cinda Real Estate Co Ltd fell 2.3 percent to 3.41 yuan.
China Construction Bank Corp, reportedly the biggest creditor of Zhejiang Xingrun, lost 0.8 percent to 3.78 yuan. China Minsheng Banking Corp Ltd dropped 2 percent to 7.23 yuan.
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