* HSI -1.9 pct, H-shares -2.0 pct, CSI300 -1.1 pct
* Growth plays hurt, China pledges action on industrial
* Beijing to roll out interest rate reform by year-end -
* Zijin Mining H-shares plunge 10 pct after profit warning
* HK property hit by bad weekend sales, rising Treasury
By Clement Tan
HONG KONG, July 8 China shares tumbled from a
two-week high on Monday, after Beijing pledged to cut off credit
to industries plagued by overcapacity to force consolidation,
triggering broad losses across the board.
The Chinese banking sector was also hurt by an official
China Securities Journal report that the People's Bank of China
is likely to unveil detailed measures to liberalize interest
rates this year.
Hong Kong property counters were hit by bad weekend sales
and rising Treasury yields after positive U.S. jobs data on
Friday spawned expectations the Federal Reserve could soon begin
At 0320 GMT, the Shanghai Composite Index was off
1.3 percent and the CSI300 of the leading Shanghai and
Shenzhen A-share listings was off 1.1 percent. Both had ended on
Friday at their highest since June 21.
The Hang Seng Index slid 1.9 percent, while the China
Enterprises Index of the top Chinese listings in Hong
Kong fell 2.0 percent. Losses almost completely reversed the
rebound by both indexes late last week.
"It's double whammy in Hong Kong today, with the China
credit announcement and the U.S. jobs data," said Jackson Wong,
vice-president for equity sales at Tanrich Securities.
"The money in the market is very short-term right now. Most
investors have given up hope for any stimulus from Beijing, but
now it seems they could be rolling out stricter ground rules to
aid the restructuring of the economy," Wong added.
In a statement from the State Council on Friday, Beijing
laid out plans to ensure banks support the kind of economic
rebalancing China's new leadership wants as it focuses on
high-end manufacturing and seeks to end the dependence on
extravagant investment funded by cheap debt.
China's Finance Ministry also told central government
agencies to cut expenditures by 5 percent this year, a move the
official Xinhua news agency said was part of an austerity
campaign launched by the country's new leaders.
Shares of companies that have bigger balance sheet issues
suffered higher percentage losses. China National Building
Material, among the larger cement producers, sank 4.5
percent to test 21-month lows.
Hong Kong property developers dived on anticipation of
higher interest rates, which could hurt demand, after U.S. job
growth was stronger than expected in June and the payroll gains
for the prior two months were revised higher.
New World Development dived 3.9 percent, while
Link real estate investment trust (REIT) sank 1.8
percent to its lowest in almost two weeks.
According to BNP Paribas, secondary property market sales
stayed weak and only 18 units were sold in the primary market
over the July 6-7 weekend, 75 percent fewer than the 72 units
sold the previous weekend.
Hong Kong property agents and investors marched on Sunday,
protesting against curbs imposed by the government that have
curbed transaction volumes, but not prices.
CHINA POLICY CONCERNS
Chinese banks were among the leading index drags on fears of
lower net interest margins following greater interest rate
liberalisation. Industrial and Commercial Bank of China (ICBC)
dived 3.1 percent in Hong Kong and 1
percent in Shanghai.
The same China Securities Journal report also suggested
there will be no easing of policy after it referred to market
liquidity as "sufficient" and deposit growth as being
"positive," while referring to June's interbank liquidity
squeeze as a stress test ahead of reforms.
Zijin Mining plunged 9.5 percent in
Hong Kong after China's largest gold miner warned that first
half profit could decline 45 to 55 percent from a year earlier.
Its Shanghai listing was down 1.9 percent.
The Economic Information Daily reported on Monday that more
than one-fifth of the nearly 1,000 mainland-listed firms that
have issued earnings forecasts expect a profit decline for the
first half. A total of 139 warned of possible losses, with those
in the steel, coal, non-ferrous metal and high-end catering
businesses figuring prominently.
Investors will also be watching monthly economic data from
China this week. Beijing is due to post June inflation on
Tuesday and trade on Wednesday, with loan growth money supply
data expected any time between July 8 and 15.
Second quarter GDP growth is due on July 15, as are monthly
urban investment, industrial output and retail sales figures.
The median forecast of 21 economists polled by Reuters show
China's economy in April-June likely grew 7.5 percent from a
year ago, slowing from the previous three months as weak demand
dented factory output and investment growth.