Shares fall on fears of mainland lending freeze
Hong Kong and mainland stock markets declined yesterday amid fears Beijing will freeze lending to cool runaway economic growth.
Mainland bank shares led the decline after the Wall Street Journal reported that the banking watchdog ordered banks to keep lending at last month's level to curb excess liquidity.
The China Banking Regulatory Commission denied it had made the instruction but conceded it was giving guidance to banks to slow lending if they had already had loan growth of 15 per cent or more this year.
The 15 per cent ceiling on loan growth was an 'informal guidance, not a hard target', said Lai Xiaomin, a spokesman at CBRC.
The Hang Seng Index fell 154.26 points or 0.56 per cent to close at 27,460.17 while the Shanghai Composite Index ended 46.457 points or 0.87 per cent lower at 5,269.817.
A mainland banking source said the CBRC had met with mainland and foreign lenders in the past two weeks and indicated that it was better for them to keep their lending at last month's levels.
'They asked banks to avoid overlending to the property sector but encouraged them to lend to sectors which the country wanted to develop,' the source said.
China Merchants Bank's A shares slumped 3.21 per cent yesterday while Bank of Communications fell 2.05 per cent.
David Li Kwok-po, the chairman of Bank of East Asia, said the mainland regulator did not want loan growth to exceed a certain level but expected the impact on his bank would not be significant.
Mainland banks extended 3.5 trillion yuan of new loans in the first 10 months of the year, a 15.6 per cent increase from the end of last year, according to central bank data. Bank of Communications had the biggest loan growth among state-owned lenders in the first nine months of the year, up 19.61 per cent from the end of December.
Bank of China recorded growth of 17.28 per cent, followed by China Construction Bank with 13.49 per cent and Industrial and Commercial Bank of China with 11.37 per cent.
Doris Chen, a financial sector analyst at BNP Paribas, said the lending restrictions might have a slightly negative impact on some small banks.
Patrick Yiu Ho-yin, an associate director at CASH Asset Management, said the impact of tighter lending on the Hong Kong stock market would not be significant. 'It's more of a psychological effect. The results of mainland banks may not be affected either as some had reached their full-year lending targets earlier.'
Meanwhile, Stanley Ho Hung-sun, the chairman of Shun Tak Holdings, expected the index to top 30,000 points again by the end of the year and 40,000 next year. 'Some people are playing with the market now,' he said. 'People should stay calm.'
