China A-shares close sharply lower; financials, property hit - UPDATE

China A-shares closed sharply lower led by financials and property developers, amid uncertainty over the government's monetary policy moves, dealers said.

They said that the local bourse was also impacted by the slump in regional markets.

The benchmark Shanghai Composite Index closed down 98.81 points or 3.43 pct at 2,779.45, off a low of 2,769.91 and high of 2,896.33.

Turnover rose to 75.18 bln yuan from 59.46 bln yuan yesterday.

"There is divergence among the investors' views about the government' moves on monetary policy with some institutional investors dumping shares," said Zhang Gang, an analyst with Central China Securities.

He said the A-share market was also influenced by the weak regional markets amid the resurfacing of credit crisis fears in the US.

The Hang Seng index closed the morning down 3.23 pct at 21,303.44.

The National Development and Reform Commission warned in a statement yesterday that upward pressure on prices remains strong, although favorable conditions are in place to help keep Chinese inflation in check.

The NDRC statement comes just days ahead of the release of second quarter economic data.

Analysts said the statement led some investors to doubt their previous view that the government would loosen monetary conditions, since tackling inflation still appears to be its top priority.

"Some investors took the NDRC's statement to mean that the government has not given up its monetary tightening yet, which dampened sentiment, with banks and property developers hit the hardest," said Wu Dazhong, an analyst with Shenyin & Wanguo Securities.

He also noted that investors are likely to lock in profits amid the uncertainty ahead of the release of key economic data on Thursday.

The market expects consumer price index growth to slow to 7.1 pct in June, down from 7.7 pct in May and the near-12-year high of 8.7 pct recorded in February.

News that more insurers will be allowed to directly invest in the stock markets also failed to encourage investors, analysts noted.

The official Shanghai Securities News reported today that the China Insurance Regulatory Commission (CIRC) is drafting new rules to allow more small and medium-sized insurance companies to directly invest in the stock markets.

The plan, which gave few details, will not boost to the stock market in the near-term, although it will allow more capital inflows into the market in the long term, they added.

Bank of Beijing (SHA 601169) tumbled 6.06 pct to 13.33 yuan. The bank forecast first half net profit to have risen by over 120 pct year-on-year under Chinese accounting standards, supported by steady growth in all business lines.

Bank of Nanjing (SHA 601009) shed 6.24 pct to 11.27 yuan after news that 531.21 mln of its A-shares will come out of lockup and be available for trading from July 21.

Industrial and Commercial Bank of China (ICBC) (SHA 601398; HK 1398), fell 3.37 pct to 4.88 yuan and China Construction Bank (SHA 601939; HK 939) lost 4.09 pct to 5.86 yuan.

China Vanke (SZA 000002; SZB 200002), the country's top property developer by market value, fell 7.17 pct to 8.80 yuan.

Poly Real Estate Group (SHA 600048) tumbled by the 10 pct daily limit to 15.12 yuan.

Brokers were also lower. Guoyuan Securities (SZA 000728) fell 6.50 pct to 16.53 yuan. The company said unaudited first half net profit was 409.94 mln yuan, against a net profit of 923.98 mln a year earlier.

CITIC Securities (SHA 600030) slid 5.92 pct to 23.03 yuan.

Oil refiners fell on rising oil prices with China Petroleum & Chemical Corp (Sinopec) (SHA 600028; HK 0386; NYSE SNP), Asia's top refiner, down 1.26 pct at 10.21 yuan.

PetroChina (SHA 601857; HK 0857), the biggest index component, shed 2.11 pct to 14.82 yuan.

Chongqing Iron & Steel (SHA 601005; HK 1053) was up 3.33 pct at 5.59 yuan after it projected more than 60 pct growth in first half net profit.

Liuzhou Iron & Steel (SHA 601003) rose 10 pct to 6.20 yuan, while Baoshan Iron & Steel (SHA 600019) was down 2.68 pct at 8.72 yuan.

Shandong Gold-Mining (SHA 600547) rose 1.97 pct to 65.59 yuan after the company projected over 400 pct growth in first half net profit.

The Shanghai A-share Index was down 103.82 points or 3.44 pct at 2,915.29, while the Shenzhen A-share Index fell 29.65 points or 3.24 pct to 884.31.

The FTSE/Xinhua China A 50 Index was down 498.25 points or 4.69 pct at 10,127.94 and the FTSE/Xinhua China A 200 Index fell 344.47 points or 4.16 pct to 7,937.18.

(1 usd = 6.85 yuan)

ina.zhou@xfn.com

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