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Hong Kong - Chinese stocks fell the most in a month, led by property and small-cap shares, on concern the government will act to cool speculative activity in the nation’s financial markets.
The Shanghai Composite Index retreated 1.1% as of 07:19, poised for its biggest decline since July 27 and dropping below its 200-day moving average. A gauge of real estate companies slumped 2.6%, led by Gemdale Shanghai authorities are planning to hold meetings to discuss ways to cool surging property prices, according to people familiar with the matter.
The ChiNext index of smaller companies slid 1.4% in Shenzhen. Stocks in Hong Kong rose as Galaxy Entertainment climbed after its earnings beat estimates.
The government on Wednesday imposed limits on lending by peer-to-peer platforms to individuals and companies in an effort to curb risks in one part of the loosely regulated shadow-banking sector.
The same day it sold 14-day reverse-repurchase agreements, its first offering of anything with a tenor other than seven days since February, spurring speculation officials want to curb leverage in the bond market by making it less profitable for investors borrowing to buy 10-year debt.
“It is probably the speculation that the authorities are discouraging over-leveraging in bond markets, which may have a chilling effect on the stock market," said Bernard Aw, a Singapore-based strategist at IG Asia. "From a technical perspective, the Shanghai Composite has been tracking the 200-day moving average lower recently, and finally tested below it this morning.”
The Hang Seng China Enterprises Index added 0.2%, while the Hang Seng Index rose 0.1%.
China’s top leaders last month pledged to curb asset bubbles in a Politburo meeting led by President Xi Jinping. In the past 12 months, the country has seen markets from stocks to commodities and property overheat as the central bank eased monetary policy, while weaker-than-estimated data suggest the extra liquidity is failing to benefit the broader economy.
The Shanghai Stock Exchange Property Index dropped the most since June 13. Gemdale slid 4.9% and China State Construction Engineering declined 2.4%.
Regulators may impose curbs on lending to developers and homebuyers in an effort to damp prices, said the people who asked not to be identified because the plans haven’t been publicly disclosed.
Regulators will talk about increasing down-payments to 50% for first-time residential buyers, and to 70% for buyers with previous borrowing records, according to the people, who said the plans have not been finalized.
P2P cap
The ChiNext index dropped to a two-week low, while P2P Financial Information Service lost 3.1% in Shanghai.
The China Banking Regulatory Commission said on Wednesday an individual can borrow as much as 1 million yuan from P2P sites, including a maximum of 200 000 yuan per site. Corporate borrowers are capped at five times those levels. China’s authorities are concerned about defaults and fraud among the nation’s more than 2 300 online lenders.
"The P2P crackdown is part of a broad tightening to curb risks and cut leverage in banking, insurance and brokerage sectors, as regulators deal with problems from last year’s loosening," said Dai Ming, a fund manager at Hengsheng Asset Management in Shanghai.
"The crackdown will likely kill 70% to 80% of the P2P companies."
Excessively leveraged
The monetary authority continued its cash injections on Thursday, offering 140 billion yuan of seven-day repos and 80 billion yuan of 14-day contracts. Accounting for maturing repos, the operations added a net 170 billion yuan to the banking system.
“Investors are waiting for further signals from the central bank,” said Shen Bifan, an analyst at First Capital Securities’ fixed-income department. “It seems the PBOC wants to warn investors not to get excessively leveraged, but on the other hand, it wants to keep the measure moderate to avoid panicking the market.”
The Hang Seng Index rose 0.2% as investors weighed a slew of earnings. Galaxy gained 3.1%. The company’s second-quarter earnings rose 22% from a year earlier as the opening of new resorts boosted non-gaming revenue and casino market share.
China Mengniu Dairy surged the most since March 30 after its first-half sales beat analyst estimates. China Construction Bank, which will announce earnings later on Thursday, rose 1.4%.
Cathay Pacific Airways advanced 1.3%. The stock is the worst-performing on the Hang Seng Index this month after saying on August 17 that net income fell 82%.
Cnooc slumped 1.1%. The company swung to a 7.74 billion yuan loss in the January to June period, compared with a net income of 14.7 billion yuan a year earlier.
