China’s stocks dropped for a third consecutive trading day, with a 2.1 per cent gain on the benchmark evaporating, as concerns that the government will scale back policy easing countered credit growth that exceeded analysts’ estimates.
The Shanghai Composite Index fell 0.3 per cent, or 10.84 points, to 3,177.79 at the close on Monday. The ChiNext gauge of small companies declined 1.7 per cent. Hong Kong’s Hang Seng Index slipped 0.3 per cent to the lowest level in almost two weeks.
Equities opened higher in the morning, buoyed by better-than-expected March data on aggregate financing and new lending, before selling eventually swept across the board to turn the gain into a loss on the benchmark. Brokerages and carmakers led decliners in the mainland.
Jitters ballooned among traders that the government will pare policy easing amid accelerating inflation, said Wu Kan, an investment manager at Soochow Securities. Meanwhile, Haitong Securities said China’s stocks, the world’s best performer this year, may take a breather in the second quarter, as a further rally requires a recovery in corporate earnings after the improvement in leading economic indicators, including credit growth and the purchasing managers’ index.
“The market is concerned that better-than-expected March credit data may be a one-off,” said Wu at Soochow Securities in Shanghai. “We had pretty high inflation data in March and that’s leading investors to believe that it will put constraint on the government to further ease policies.”
He also said that some traders were selling into the rally in the morning, as strong credit growth data was largely priced into a 27 per cent rise on the Shanghai Composite this year.
China’s Aggregate financing, the broadest measure of credit supply, was 2.86 trillion yuan (US$425.9 billion) in March, while new lending totalled 1.69 trillion yuan, the central bank said after the market closed on Friday. Both data beat the analysts’ projection in a Bloomberg survey. Gains in consumer prices accelerated to 2.4 per cent last month, according to data released last week by the statistics bureau.
Western Securities paced the decline among brokerages, with the stock falling 3.5 per cent to 11.77 yuan. Southwest Securities slid 3.4 per cent to 5.89 yuan and Sealand Securities lost 3.2 per cent to 6.02 yuan.
Jiangling Motors fell by the 10 per cent daily limit to 27.95 yuan after the carmaker said in a weekend statement that first-quarter net income may have fallen by 84 per cent from a year earlier. The company attributed the falling profit to decreased sales and rising marketing costs.
Shandong Chenming Paper Holdings sank 8.9 per cent to 6.55 yuan after the company said profits for the first three months probably dropped by as much as 96 per cent from a year earlier. Its Hong Kong-traded stocks slumped 11 per cent to HK$4.23.
In Hong Kong, the Hang Seng Index dropped 0.3 per cent, or 99.04 points, to 29,810.72. The Hang Seng China Enterprises Index, or the H-share gauge, slipped 0.2 per cent.
Sunshine 100 China Holdings tumbled 8.7 per cent to HK$1.58 after the mainland Chinese developer sold a majority interest in its Qingyuan project to rival Kaisa Group Holdings for 4.66 billion yuan (US$695.1 million).
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