China Growth Stocks

[pnnymn]

SHANGHAI (Dow Jones)--China shares dropped to their lowest level in nearly three months Tuesday, weighed by unabated concerns about the impact lending curbs may have on market liquidity.

The benchmark Shanghai Composite Index, which tracks both A and B shares, fell 2.4%, or 75.02 points, to 3019.39, its lowest level since it ended at 2995.85 on Oct. 30.

The Shenzhen Composite Index fell 3.1%, or 36.08 points, to 1112.41.

Analysts said the Shanghai index is likely to find support at 3,000 in the coming sessions, as concerns Beijing may take further steps to curb lending growth are likely to weigh on demand.

"The concerns about credit tightening are weighing on investor sentiment, but the drop in the index today is larger than what we had expected," said Amy Lin, an analyst from Capital Securities.

Banks and property developers fell after Dow Jones Newswires reported at least three major Chinese lenders have suspended lending in a sign Beijing has stepped up its efforts to rein in loan growth amid concerns about inflation risks and the formation of asset bubbles.

China Merchants Bank ended 0.9% down at CNY16.09, and China Construction Bank fell 1.2% to CNY5.84.

Property developers tumbled due to concerns about tightening liquidity as the industry is heavily reliant on credit.

China Vanke, the country's largest property developer by market capitalization, dropped 3.2% to CNY9.22, while Poly Real Estate fell 4.8% to CNY18.97.

On Friday, Industrial & Commercial Bank of China Ltd., the nation's biggest lender by assets, ordered its Beijing branches not to issue any new loans for the rest of January, a person with direct knowledge of the matter said Tuesday.

A Shanghai-based China Citic Bank Corp. official said the bank had suspended new lending in Shanghai last week.

Last week, an unnamed official at Bank of China Ltd. said the state-run lender had ordered its credit officials to stop making new yuan loans.

Despite the market's weak performance Tuesday, analysts said the index is unlikely to head toward a downward spiral.

"There was some panic selling earlier in the day, and there has been a dearth of news that could lift blue chips. The selloff should be temporary as concerns about lending curbs have more or less been priced in," said Zhang Gang, an analyst at Southwest Securities.

By Esther Fung, Dow Jones Newswires; 86-21-6120-1200; [e-mail]
http://online.wsj.com/article/BT-CO-20100126-702247.html?mod=rss_Global_Stocks