China to Trim Lending by 22%; Stocks Plunge

Mayank Mehta
20 Jan, 2010
New York City

Markets in Hong Kong and Shanghai dropped sharply after regulators seek to curb lending by 22% in 2010. Home prices are expected to increase at least 10% in mainland China and Hong Kong. Property price index in Hong Kong surged 33% in 2009, leading the world real estate prices.

[R]8:00 PM Hong Kong, China – Markets in Hong Kong and Shanghai dropped sharply after regulators seek to curb lending by 22% in 2010. Home prices are expected to increase at least 10% in mainland China and Hong Kong. Property price index in Hong Kong surged 33% in 2009, leading the world real estate prices.][/R]

Stocks and commodities in China declined sharply after the head of Chinese bank regulators said that lending in 2010 is likely to be 22% lower from a year ago. Banks declined in Hong Kong and in Shanghai.

Hang Seng index in Hong Kong decreased 391.81 or 1.81% to 21,286.17, and CSI 300 index in China lower 113.05 or 3.22% to 3,394.43.

Head of banking regulation, Liu Mingkang said China is looking to curb the lending by 22% to 7.5 trillion yuan or $1.1 trillion. The tighter lending is expected to curb asset prices and real estate markets.

Lending in the first two weeks surged to twice the monthly level in the second half of 2009 as China pushed through the 4 trillion yuan of economic stimulus.

China is estimated to report fourth quarter gross domestic product expansion of more than 10% tomorrow. For the year China is expected to exceed its target of 8% growth.

Hong Kong home price index maintained by real estate advisor Knight Frank LLP surged 33% in 2009. Prices have been on the rise in the last twelve years and are expected to increase at a slower pace in 2010.

Justin Chiu, executive direct of property developer Cheung Kong said in Hong Kong today that home prices are expected to rise 10% to 15% and new entry level home prices are expected to increase 15% to 20%.

Other Movers

Air China Limited fell 1.6% to 10.90 yuan after the international carrier estimates turnaround and net income in 2009.

Bank of China Limited decreased 3.6% to HK$3.94 after the bank and MoneyGram International announced today an agreement that will bring MoneyGram money transfer services to bank’s 10,000 domestic branches.

Cheung Kong (Holdings) Limited fell 1.4% to HK$98.60 after the investment and project management company said that Li Ka-shing raised his stakes in property flagship Cheung Kong (Holdings) Ltd. and telecommunications-to-ports conglomerate Hutchison Whampoa Ltd.

China Construction Bank Corporation dropped 2.9% to HK$6.23.

Datang International Power Generational Co. Ltd the electricity producer dropped 2.1% to 8.77 yuan.

Industrial and Commercial Bank of China Limited declined 2.6% to HK$5.89 after the commercial bank has been ordered by the central bank to increase its reserve ratio by 0.5% according to a report by Reuters. China Citic Bank Co. and Everbright Bank Co are also expected to increase their ratios.

Ping An Insurance (Group) Company of China, Ltd dropped 2.2% to HK$66.05 after the insurer said its 2009 results were ""better-than-expected"" and that the momentum will continue into 2010.