China markets drop as Beijing attempts to limit flow of money into real estate
China markets declined today, led by property related shares after Premier Wen Jiabao said that banks would be required to issue new loans to small and medium enterprises, reducing the flow of money that has been flowing into real estate.
The Shanghai Comprehensive Index dropped 2.59 percent to 2915.80. The Shenzhen Composit Index lost 3.21 percent to 11688.17.The SME Comprehensive Index declined 1.31 percent to 4359.00.
The Hang Seng Index slid 0.49 percent to 20435.24. The Hang Seng Growth Enterprises Index added 0.86percent to 629.04. The Hang Seng China Enterprise Index lost 0.42 percent to 11654.81. Taiwan TAIEX Index slid 0.42 percent to 6809.41.
Chalco (SH:601600; HK:2600), China's largest aluminium producer, fell 2.89 percent in Shanghai and 1.85 percent in Hong Kong after posting RMB 1.6 billion loss for the second quarter.
Yesterday evening on a visit to small and medium enterprises in Zhejiang province, Premier Wen Jiabao reiterated the government's commitment to "moderately loose monetary policy" but said that Beijing would be requiring banks to issue loans to small and medium enterprises.
This is being widely interpreted as an attempt to stop banks issuing new loans to large state-owned enterprises, money which has been ending up in property or the stock exchange.
The move is being seen as part of a wider strategy to limit the amount of money flowing into the property market. Banks in Beijing have already stopped providing discounts to second-hand home buyers, the Economic Observer reported today.
Steel shares dropped 4.67 percent on average. Baogang Steel (SH:600019) lost 5.91 percent. Angang Steel (SZ:000898;HK:0347) lost 1.34 percent in Shenzhen and 1.79 percent in Hong Kong.Hangzhou Iron & Steel Co.(SH:600126) fell to the 10 percent trading floor.
Construction shares lost 3.26 percent on average. China State Construction International (SH:601668;HK:3311) declined 4.14 percent in Shanghai and 2.51 percent in Hong Kong. Shanghai Construction Co.(SH:600170) dropped 4.80 percent.
Property developers also sank. China Vanke Co. (SZ:200002) was down 4 percent. Gemdale Corporation (SH:600383) was down 6.8 percent.
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