Mainland markets drop on concerns about bank record loans
Mainland markets drop on concerns about bank record loans
Mainland China stocks dropped, led by banks, on concerns about the quality of RMB1 trillion new loans made in Februrary. The Shanghai Comprehensive Index declined 0.24 percent to 2133.88.
The Hang Seng Index added 0.59 percent to 12001.53 as HSBC (HK:00005) rallied 1.67 percent to HK$36.2. Zhejiang Prospect Co.(HK:08273), an auto parts producer, surged 28.3 percent.
Invengo Information Technology Co.(SZ:002161), a leading producer of RFID technology, surged 9.79 percent. The company innitiated its stock option ncentive plan today. ZOJE Sewing Machine Co.(SZ:002021) surged to the 10 percent trading cap after annoucing the completion of its stock options incentive plan.
Loan surge cause concern, banks asked to increase provision
New loans in February totalled RMB1,070bn ($157bn). With RMB1,620bn already issued in January, China is already more than halfway towards reaching its 2009 goal of at least RMB5,000bn in new bank lending despite still having another 10 months to go.
Some concern has been voiced about the degree of risk being taken on by China's banks, with fears that the number of bad loans could rise significantly.
The biggest five commercial lenders have been told by China's central bank to increase to raise provisions to 150 percent of bad loans currently on their books, because of worries that asset quality may deteriorate amid the slowing economy. The five lenders affected by the order are Agricultural Bank of China, Industrial and Commercial Bank of China (SH:601398;HK:01398), China Construction Bank (SH:601939;HK:00939), Bank of China and Bank of Communications.
The rate had only just been increased in December from 100 percent to 130, after the central bank eased requirements for issuing loans in November in order to boost the economy. The latest raise in provisions to 150 percent could cause the banks' profits to drop by about 10 percent,
Industrial and Commercial Bank of China, the world’s largest bank, lost 0.54 percent on Shanghai trading and 2.15 percent on Hong Kong trading. China Construction Bank fell 0.49 percent on Shanghai and 2.02 percent on Hong Kong.
China's banks will also have to increase their capital adequacy ratio to a 10 percent in 2009 and a 12 percent in 2010.
Related news
- Peninsula Energy chairman talks to Proactive Investors in Stocktube Video
- Empire Energy Group hits oil production milestone in Appalachia
- Aminex and Solo Oil to carry out further analysis on Ntorya-1 well
- Angel Biotechnology shares surge as it reveals new contracts worth total of £4.5mln
- Pan Pacific Aggregates secures £2m facility from Yorkville Advisors
- Sunrise Resources reveals high grade results from Derryginagh barite project – UPDATE
- Red Rock Resources acquires option in Kansai Mining
