China Regulators Worry Bad Debts; Lenovo Profit

123jump.com Staff
04 Feb, 2010
New York City

Stocks in Shanghai and Hong Kong declined on the weakness in global markets. Chinese banking regulators said that a drop of 10% in real estate values will increase bad loans three folds and 30% drop will cause bad loans to surge five-fold. Lenovo Group returns to profit in third quarter.

[R]9:00 PM Hong Kong, China – Stocks in Shanghai and Hong Kong declined on the weakness in global markets. Chinese banking regulators said that a drop of 10% in real estate values will increase bad loans three folds and 30% drop will cause bad loans to surge five-fold. Lenovo Group returns to profit in third quarter.[/R]

Banks remain in focus as Chinese regulators worry that a decline in property market may increase loan losses at banks. China Banking Regulatory Commission said the loan loss ratio would surge to 1.18% from 0.43% if real estate prices decrease 10% and surge to more than 2.5% if prices drop 30%.

Chinese regulators have been worried that prices in many cities are at unsustainable level and may drop sharply hurting banks. Banks in Shanghai offered 163 billion yuan in new mortgage loans with the total loans outstanding to 760.4 billion yuan.

Bad loan ratio at the end of 2009 in the city was 0.72%.

Hang Seng index in Hong Kong decreased 380.44 or 1.84% to 20,341.64, and CSI 300 index in China lower 11.91 or 0.37% to 3,218.80.

Shanghai Movers

Aluminum Corporation of China Limited fell 1.6% to 12.53 yuan and China Shenhua Energy Company Limited dropped 1.9% to 29.22 yuan.

Shaanxi Broadcast & TV Network Intermediary Co., Ltd surged 10.0% to 13.06 yuan.

Tibet Rhodiola Pharmaceutical Holding Co surged 10.3% to 16.67 yuan.

Xinhu Zhongbao Co., Ltd added 3.6% to 8.52 yuan after the property developer announced that it will purchase a 35% stake in a Guangzhou-based real estate investment company at $200 million.

HK Movers

Bank of Communications Co., Ltd slipped 1.8% to HK$7.89.

C C Land Holdings Limited the property developer dropped 2.7% to HK$2.84.

China National Building Material Company Limited dropped 5.8% to HK$13.32 after the building materials manufacturer was downgraded to “underperform” from “neutral” by Credit Suisse Group AG.

Esprit Holdings decreased 0.4% to HK$57.70 after its former chairman Michael Ying lowered his stake in the company through a sale of HK$3.08 billion worth shares, according to the news report on Bloomberg citing a sales arranged by UBS AG.

Lenovo Group Limited rose 0.1% to HK$5.69 after the maker of personal computers reported third quarter revenues rose 33% to $4.8 billion from $3.6 billion a year ago. Net profit in the quarter was $80 million or 86 cents per diluted share compared to net loss of $97 million or 1.09 cents per share a year ago.