Markets

Equities dip on property, debt concerns

By Zhang Shidong (China Daily)
Updated: 2010-06-30 10:04

Tuesday's retreat capped a five-day, 6.2 percent decline for the Shanghai Composite Index. That's the longest losing streak in two months.

Agricultural Bank of China (ABC) set a price range for the Shanghai part of its IPO that will allow it to raise as much as $20.1 billion.

The Beijing-based bank may offer 22.2 billion shares in Shanghai at 2.52 yuan (37 US cents) to 2.68 yuan apiece, it said on Monday.

ABC last week priced shares in the Hong Kong part of its IPO at HK$2.88 to HK$3.48 each.

Chinese banks will face a rise in bad loans that is unlikely to be big enough to cause "system-wide distress", according to Moody's Investors Service.

Real estate industry and local-government financing vehicles will be sources of bad loans, said Yvonne Zhang, a China banking analyst at Moody's.

Economic growth and government policy are key to loan quality at China's banks, she said.

The CSI Smallcap 500 Index, which trades at about 40 times reported earnings, slid 5.7 percent to 3736.98, the lowest close since Oct 16.

Related readings:  Chinese stocks slump 4.27% to 14-month low Tuesday  HK stocks close 2.31% lower -- June 29  Property market sees sold-floor space up last week  Agricultural Bank of China to launch $11.4b IPO  400b yuan raised since restart of IPO

"The major problem with small-cap stocks is their high valuations," said Zheng Tuo, president of Shanghai Good Hope Equity Investment Management Co. "There's no way they can hold such a high valuation amid the economic slowdown."

Hang Seng falls

Hong Kong stocks dropped, dragging down the Hang Seng Index the most in five weeks, on concern China's economic expansion will slow after the New York-based Conference Board revised down an estimate for growth.

The Hang Seng Index fell 2.31 percent to 20248.90 on Tuesday, heading to its biggest slump since May 25. The Hang Seng China Enterprises Index declined 2.7 percent to 11536.20.

The Hang Seng Index has retreated 4.7 percent this quarter, extending its decline this year to 7.4 percent.

Bloomberg News