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Credit growth cap sinks stocks in China

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decline_7 July 5, 2012 (Chinavestor) News that China will contain credit growth via keeping a cap on loans at deposits sent the Shanghai Composite Index (SHA:000001) 26.0 points or 1.2% lower on Thursday. Investors' hopes for a loosening monetary policy were smashed, sending financial securities and related stocks down to a tail spin. The decline was universal, stocks that fell outnumbered those that advanced seven to one among components of the Shanghai Composite Index (SHA:000001). But insurers beat the market for China Life Insurance (SHA:601628), China Pacific Insurance ( SHA:601601) and Ping An Insurance (SHA:601318), making up the lion share of China's insurance market, all advanced. Poly Real Estate (SHA:600048), the largest Shanghai listed property developer, rose 1.83%, the most among the 50 largest components of the broad Shanghai Composite Index (SHA:000001). China Vanke (SHE:200002), the largest listed property developer, advanced 1.78% on the Shenzhen Stock Exchange.


Investors were less cautious in Hong Kong where the Hang Seng Index (INDEXHANGSENG:.HSI) rose 99.4 points or 0.5% on Thursday. Value buyers snapped up shares of China Unicom (HKG:0762), making it the best performing stock among components of the 42 member Hang Seng Index (INDEXHANGSENG:.HSI). The stock fell over 35% YTD despite a recent pick-up. H-share of China Life Insurance (HKG:2628) shined in Hong Kong in addition to its Mainland listing. The stock rose 2.7%, just as much as China Unicom (HKG:0762). But Huaneng Power Int. (HKG:0902) slid another 3.0% for the week on Thursday, making a combined loss of over 6% for the week. China Eastern Airlines (HKG:0670) and Yanzhou Coal (HKG:1171) fell over 2% each, something that will have effect on their ADR trading on the NYSE today.


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