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Market Update

China Differentiates Bank Reserves Ratios; Weekly Drop of 4.5% in HK Index

Author: 123jump.com Staff
Last Update: 7:02 AM ET February 11 2011

5:00 PM Hong Kong – Stocks in Hong Kong lost 4.5% in the week. Property developers were in focus after Shanghai new home sales in December declined 25%, however 84 new projects are expected to start this year. People’s Bank of China differentiated reserve requirements for small and large banks as lending surge above 1 trillion yen.

China struggles to stem sustained lending increase at banks. According to China Securities Journal the central bank is imposing different capital requirement at large and small banks as most of the increase in lending is concentrated in smaller banks.

The differentiated reserve ratio will also help the central bank to manage liquidity and facilitate the smooth transition from maturing bills and notes to new Chinese government loans.

Two separate private estimates suggest small banks garner 70% of the new loans in January that may have exceeded 1 trillion yen of $175 billion.

Hong Kong stocks closed higher today but fell 4.5% in the week. Fears of higher inflation and further tightening of bank lending and mixed earnings have kept investors on the sidelines.

Hang Seng index rose 0.53% to 22,828.92 and declined 0.9% for the year. Shanghai Composite Index increased 0.33% or 9.17 to 2,827.33.

Investors are awaiting inflation and bank lending data next week. Economists expect bank lending to rise between 7% and 9% and inflation near 4.5%. Wheat prices have surged in the last two weeks on the drought conditions and cotton prices are trading near multi-year high.

New homes sales in Shanghai dropped 25% in January from December to 1.05 million square meters according to Shanghai Uwin Real Estate Information Service Co. and quoted in Shanghai Daily.

However, local media suggested that 84 new projects are expected to start in Shanghai this year including the construction of Disney Park project.

HK Stock Movers

Property developers declined. Agile Property Holdings Ltd fell 1.7% to HK$11.10 and China Resources Land dropped 1.0% to HK$12.70.

In Shanghai trading, Shanghai Pudong Road and Bridge Construction Co soared daily limit of 10% to 20.17 yuan and Shanghai Jielong Industry Corp gained 3.7% to 11.69 yuan.

Esprit Holdings Ltd closed up 4.3% to a two-month high on the expectations of higher earnings growth in the second half. Global trade has been on the recovery and exports to Asia and Europe have been on the rise for the last nine months.

Foxconn increased 3.6% to HK$5.60 and HSBC Holdings Plc declined 0.7%. Li & Fung Ltd rose 2% to HK$45.97.

Mongolia Energy Corp dropped 6.5% to HK$2.05 after the stock was dropped from the MSCI Hong Kong Index and was added to MSCI Hong Kong Small Cap Index.

Tencent Holdings Ltd gained more than 5% as investors sought out Internet companies. The China based gaming company has been a favored investment among international fund managers.

Tangshan Jidong Cement Co. increased 7% to 23.55 yuan and Anhui Conch Cement Co rose 3.8% to 31.2 yuan.

Zhaojin Mining Industry Co Ltd soared 10.4% as god prices rebound in the last two weeks on the worries in Egypt and wider Middle East contagion.

Sources: Data collected by 123jump.com and Ticker.com from company press releases, filings and corporate websites. Market data: BATS Exchange. Inc