June 26, 2013 / 5:20 AM / 4 years ago

China shares fall again despite PBOC comments, Hong Kong rebounds

* HSI +1.0 pct, H-shares +1.9 pct, CSI300 -0.7 pct

* China shares extend losses as sentiment remains negative

* Hong Kong shares rebound as investors hunt for bargains

* China banks remain weak on lingering fears of cash crunch

By Yimou Lee and Donny Kwok

HONG KONG, June 26 (Reuters) - China shares fell again on Wednesday as comments by the central bank failed to end worries about a cash crunch, while Hong Kong shares rebounded as investors hunted for bargains after recent market turmoil.

The “Big Four” Chinese banks extended losses in China even though the country’s short-term borrowing rates eased for a fourth day and the People’s Bank of China moved late on Tuesday to allay fears of a banking crisis. Worries have driven Shanghai shares to their lowest in nearly 4-1/2 years.

At midday, the CSI300 index of the leading Shanghai and Shenzhen listing was down 0.7 percent, while the Shanghai Composite Index dropped 1.3 percent at 1,933.58 points. Both indexes have tumbled more than 10 percent since last Wednesday when a cash squeeze in the mainland started to worsen.

The Hang Seng Index rose 1 percent, while the China Enterprises Index of the top Chinese listings in Hong Kong gained 1.9 percent and could have its best day in two months. Short selling accounted for 11.6 percent of total midday turnover, according to traders.

“Investors are taking a very short-term view. The PBOC comments have fuelled hope that the government may loosen liquidity a bit and that aided a rebound in the (Hong Kong) market,” said Alfred Chan, chief dealer at Cheer Pearl Investment. But he added that the rebound could be short-lived.

Shares in the Big Four banks went in opposite directions in the two markets, weakening in Shanghai and rising in Hong Kong, with a lift from short-covering.

“The PBOC comments did not help much to improve people’s confidence as the consequence is yet to be seen amid slow (China) economy growth,” said Alex Wong, a director at Ample Finance Group.

In Hong Kong, Industrial and Commercial Bank of China (ICBC) gained 4.3 percent and China Construction Bank (CCB) 3.9 percent, while in Shanghai ICBC dropped 2.2 percent and CCB 1 percent.

Fears of a credit crunch and slower loan growth continued to fuel selling in the mainland of smaller Chinese banks, which are more reliant on short-term interbank funding.

In Shanghai, China Minsheng Banking Corp fell 3.6 percent in spite of a statement it issued on Tuesday. The bank said that a Shanghai interbank offered rate (Shibor) hike had not caused liquidity disruption and that the management was confident about controlling credit risks despite the slowing economy.

Growth-sensitive sectors in China, from energy to materials, remained weak. Petro China fell 1.4 percent, while Zijin Mining dropped 3.3 percent.

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