State firm steps in to buy shares in banks
By Lydia Chen |
October 11, 2011, Tuesday
|
Print Edition
Print Edition
SHANGHAI shares hit a more than two-year low on the first trading day after the weeklong National Day holiday, with analysts saying the market could face further slides.
However, Central Huijin Investment Ltd, an investment company owned by the Chinese government, said after the market closed that it began to buy more shares in the country's biggest four banks, a move considered a bid to save a stock market that has so far seen a slump of more than 17 percent this year.
Huijin said it was buying shares in the Industrial & Commercial Bank of China, Agriculture Bank of China, Bank of China and Construction Bank of China.
The firm has a stellar investment record. On September 19, 2008, when it announced it was buying shares in the major banks, the move boosted the Shanghai index by 9.5 percent on the day and lifted it to 2,300 points from 1,900 points within a month. However, at the end of October that year, the index fell again to 1,664 points.
Yesterday, ICBC gained 0.25 percent, Agriculture Bank added 0.41 percent, Bank of China rose 0.70 percent and Construction Bank 0.23 percent.
The Shanghai Composite Index yesterday lost 0.61 percent to 2,344.79, the lowest since March 25, 2009, when the benchmark index closed at 2,291.55. Turnover was 40 billion yuan (US$6.29 billion) for the day, the lowest since the end of 2008, when the country was struggling with global financial crisis.
"The 2,319 point will be a technical support and could have a substantial psychological impact on investors," said Zhou Xuesong, an analyst with Citic Securities. "If the index falls below that support, the market will see more panic selling."
Developers were one of the biggest drags yesterday after the Beijing Morning Post reported that Chinese central bank adviser Zhou Qiren said the country should keep a prudent monetary policy because small companies will have a better development environment only if inflation is thoroughly curbed.
China Vanke Co, the nation's largest developer, dropped 3.31 percent to 7 yuan. Poly Real Estate Group Co, the second biggest, fell 3.46 percent to 8.93 yuan.
Sales of new homes, excluding affordable housing, dropped 40 percent from a week earlier to 85,400 square meters in Shanghai during the holiday, a traditional peak sales season, Shanghai Deovolente Realty Co said, the lowest if tracking the same-period volume registered over the past six years.
But housing prices barely budged. Prices dipped an average of 0.03 percent in September from August to 8,877 yuan per square meter across the country, according to research company China Index Academy.
Developers may have thought, wrongly, that Premier Wen Jiabao's recent trip to Wenzhou was a sign of loosening for the sector, Bloomberg News cited Credit Suisse Group AG analysts as saying.
Gui Haoming, director of Shenyin Wanguo Securities Research Institute, said China would carry on its tightening policy since inflation will remain high.
"The policies will still focus on the theme of anti-inflation and the likelihood of easing almost doesn't exist," Gui added. "Volatility is inevitable."
China International Investment Corp said yesterday that prospects for stock markets may be gloomy as selling shares will continue to be a major financing tool for Chinese firms since authorities will put more guarding measures on the country's banks following the spreading crisis among lenders in the West.
However, Central Huijin Investment Ltd, an investment company owned by the Chinese government, said after the market closed that it began to buy more shares in the country's biggest four banks, a move considered a bid to save a stock market that has so far seen a slump of more than 17 percent this year.
Huijin said it was buying shares in the Industrial & Commercial Bank of China, Agriculture Bank of China, Bank of China and Construction Bank of China.
The firm has a stellar investment record. On September 19, 2008, when it announced it was buying shares in the major banks, the move boosted the Shanghai index by 9.5 percent on the day and lifted it to 2,300 points from 1,900 points within a month. However, at the end of October that year, the index fell again to 1,664 points.
Yesterday, ICBC gained 0.25 percent, Agriculture Bank added 0.41 percent, Bank of China rose 0.70 percent and Construction Bank 0.23 percent.
The Shanghai Composite Index yesterday lost 0.61 percent to 2,344.79, the lowest since March 25, 2009, when the benchmark index closed at 2,291.55. Turnover was 40 billion yuan (US$6.29 billion) for the day, the lowest since the end of 2008, when the country was struggling with global financial crisis.
"The 2,319 point will be a technical support and could have a substantial psychological impact on investors," said Zhou Xuesong, an analyst with Citic Securities. "If the index falls below that support, the market will see more panic selling."
Developers were one of the biggest drags yesterday after the Beijing Morning Post reported that Chinese central bank adviser Zhou Qiren said the country should keep a prudent monetary policy because small companies will have a better development environment only if inflation is thoroughly curbed.
China Vanke Co, the nation's largest developer, dropped 3.31 percent to 7 yuan. Poly Real Estate Group Co, the second biggest, fell 3.46 percent to 8.93 yuan.
Sales of new homes, excluding affordable housing, dropped 40 percent from a week earlier to 85,400 square meters in Shanghai during the holiday, a traditional peak sales season, Shanghai Deovolente Realty Co said, the lowest if tracking the same-period volume registered over the past six years.
But housing prices barely budged. Prices dipped an average of 0.03 percent in September from August to 8,877 yuan per square meter across the country, according to research company China Index Academy.
Developers may have thought, wrongly, that Premier Wen Jiabao's recent trip to Wenzhou was a sign of loosening for the sector, Bloomberg News cited Credit Suisse Group AG analysts as saying.
Gui Haoming, director of Shenyin Wanguo Securities Research Institute, said China would carry on its tightening policy since inflation will remain high.
"The policies will still focus on the theme of anti-inflation and the likelihood of easing almost doesn't exist," Gui added. "Volatility is inevitable."
China International Investment Corp said yesterday that prospects for stock markets may be gloomy as selling shares will continue to be a major financing tool for Chinese firms since authorities will put more guarding measures on the country's banks following the spreading crisis among lenders in the West.
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