Steel shares including Baosteel were hit by fears that tighter credit would slow China's economy -- the world's top consumer and producer of steel. Photo: Internet
THE BENCHMARK SHANGHAI Composite Index endured a two-day rollercoaster ride on rumors of an imminent credit-tightening campaign, followed shortly thereafter by robust annual results and then a denial of any looming liquidity crackdown.
Sinafinance reported in a Chinese language story that the earliest counters to see panic selling were also the first to respond positively today to news of the credit freeze denials, namely: financials and property developers.
Shareholders in the nation’s lenders breathed a sigh of relief on the “nonevent,” and real estate shares benefited from once again escaping a policy crackdown despite seeing home prices nearly double last year in some regional markets.
The Shanghai Composite lost 2.9% on Wednesday before gaining 7.01 points, or 0.2% on Thursday, to close at 3,158.86.
The big winners on Thursday were financial institutions and real estate developers, who helped bring up the overall index despite many stocks in the energy and commodities sector remaining skittish about expected rate action in the near term.
The Shenzhen Composite Index which tracks shares on a smaller exchange in this southern city also rose 0.2% on Thursday to 1,194.21.
Chinese shares on Wednesday reacted negatively across the board to a market rumor that the People’s Bank of China was mulling a near-term interest rate hike in the wake of 2009 full-year economic figures.
Last year, China’s GDP grew by 8.7%, and leapt by 10.7% year-on-year for the fourth quarter alone.
Many analysts attributed the double-digit October-December growth to the ongoing 4.5 trln yuan government stimulus package meant to help “decouple” China from export led growth and stimulate domestic consumption during the global slowdown.
The past two days have mirrored the Shanghai Composite's nearly two-year rollercoaster ride. sinafinance.com
This easy access to credit in the economy raised alarm bells and rumors circulated along with the credit that a rate hike was in the cards soon to nip a possible inflation problem in the bud, the newspaper said.
As expected, banking shares were most sensitive to the news, as well as property developers, as the latter has enjoyed regional housing price hikes of over 50% last year in some markets and the government has hinted repeatedly that property speculation was a threat to the nation’s overall economic stability.
However, Chinese shares recovered somewhat on Thursday, led by banks and real estate, after the central bank governor downplayed a rumor that a few financial institutions would be slapped with a lending moratorium for failing to maintain compliance with credit limits.
Lenders including Industrial Bank of China, China Merchant’s Bank, and China Minsheng Bank rose today by 1.83%, 1.83% and 1.73%.
Developers also breathed a sigh of relief – at least temporarily – with China’s largest real estate firm China Vanke 0.4% higher and Poly Real Estate up 0.3%.
However, some industries were still nervous about the possibility of an imminent rate hike, especially energy and commodities counters, as an intentionally slowed-down Chinese economy would put a crimp on the ability of the world’s top user of key commodities to maintain order volumes.
Baosteel, Zijin Mining and Sinopec fell by 2.4%, 1.4%, and 1.2%, respectively.
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