* HSI -1.3 pct, H-shares -1.6 pct, CSI300 -2.8 pct
* HK property hit by bad weekend sales, rising Treasury
* Growth plays hurt, China pledges action on industrial
* Zijin Mining dives in heavy volumes after profit warning
By Clement Tan
HONG KONG, July 8 China shares had their worst
day in two weeks on Monday, with Hong Kong markets also weaker,
after Beijing pledged to cut off credit to industries plagued by
The Hong Kong property sector was hit by poor weekend sales,
rooted in fears of higher interest rates after Treasury yields
touched two-year highs. Solid U.S. jobs data on Friday had
spawned expectations the Federal Reserve may soon pare its
In their worst daily losses since June 24, the CSI300
of the leading Shanghai and Shenzhen A-share listings
skidded 2.8 percent, while the Shanghai Composite Index
sank 2.4 percent.
The Hang Seng Index fell 1.3 percent to 20,582.2, and
the China Enterprises Index of the top Chinese listings
in Hong Kong slid 1.6 percent. Both were down as much as 3
percent in early trade.
Hong Kong turnover was 22 percent below average. But short
selling interest stayed high, accounting for 12.1 percent of
turnover versus a historical 8 percent average.
"The money in the market is very short-term right now. Most
investors have given up hope for any stimulus from Beijing, but
now it seems China could be rolling out stricter ground rules to
aid the restructuring of the economy," said Jackson Wong,
vice-president for equity sales at Tanrich Securities.
In a statement Friday, the State Council laid out plans to
ensure banks support the kind of economic rebalancing China's
leadership wants as it focuses on high-end manufacturing and
ending dependence on extravagant investment funded by cheap
Shares of companies with high gearing fell. China National
Building Material (CNBM), among the larger Chinese
cement producers, sank 4.5 percent to test 21-month lows.
CNBM reported a net gearing of about 409 percent in the
first quarter, according to Nomura, with its total net debt
almost 130 billion yuan. It was one of two state-owned firms to
drop A-share IPO plans in June because they did not meet
stringent new accounting requirements.
Zijin Mining lost 7 percent in Hong
Kong after warning interim profit could decline by up to 55
percent. Its Shanghai listing sank 4.1 percent.
Shares of China Rongsheng Heavy Industries, the
largest private shipbuilder, fell more than 10 percent for a
third day, plunging 11.2 percent to a record low.
Rongsheng appealed for financial help from the government
and big shareholders on Friday after cutting its workforce and
delaying payments to suppliers.
In Hong Kong, according to BNP Paribas, secondary property
market sales stayed weak and only 18 units were sold in the
primary market this weekend, 75 percent fewer than the previous
New World Development fell 2.4 percent and Hang
Lung Property dived 3.8 percent. Link REIT
shed 0.7 percent.
CHINA POLICY CONCERNS
The Chinese banking sector was also hurt on Monday by an
official China Securities Journal report that the central bank
is likely to unveil measures to liberalize interest rates this
year - a move that could cut net interest margins.
The report suggested there will be no easing of policy,
calling market liquidity "sufficient" and deposit growth
"positive" while referring to June's interbank liquidity squeeze
as a stress test ahead of reforms.
Also hurting sentiment were mainland news reports that
initial public offering approvals may resume by early August,
which could mean more competition for limited liquidity.
China Construction Bank (CCB) fell 2.1
percent in Hong Kong, deepening 2103 losses to almost 16
percent. Its Shanghai listing shed 1.4 percent.
Losses came ahead of a slew of Chinese economic data. June
inflation is due on Tuesday and trade on Wednesday, with loan
growth and money supply data expected by July 15.
The median forecast of 21 economists polled by Reuters show
China's economy in April-June likely grew 7.5 percent from a
year ago, slowing from the previous quarter. Second quarter GDP
data is due on July 15.