Is the bubble about to burst? Prophets of doom have been warning about a correction in Chinese equities, whose recent rally they claim is not supported by fundamentals. Shares in Shanghai plunged Friday, with the main index suffering its worst weekly drop in seven years. The decline happened just when recent data including new home prices suggest that the property sector is showing signs of improvement after the central bank lowered rates three times since November last year.
Meanwhile, Hanergy continues to be bad news for certain firms. A Chinese lender decided to postpone its IPO in Hong Kong after the bourse questioned its loan to the parent of Hanergy Thin Film Power, whose prices plunged nearly 50% late last month while its owner was attending a company event in China.
Chinese shares under perform in Asia. After soaring to seven-year highs recently, Chinese equities posted their biggest weekly loss in seven years on Friday, as it closed down 6.4% to its lowest in nearly a month. For the week, the Shanghai Composite Index tumbled more than 9%. Other markets were higher following Wall Streets’ gains overnight. Japan’s Nikkei was up almost 1%, Australia’s ASX gained 1.3% and Korea’s Kospi inched up 0.3%. CNBC
BOJ keeps monetary policy steady. The central bank said the Japanese economy is recovering, albeit moderately, as it kept its pledge to increase base money at around 80 trillion yen a year through asset purchases. It also decided to cut the number of its policy meetings from next year. Asian Nikkei Review
Three Japanese banks plan yuan bonds. Mizuho Bank and Sumitomo Mitsui Banking Corp are both eyeing tapping China’s bond market after Bank of Tokyo-Mitsubishi UFJ said it will sell 350 million yuan ($56.3 million) of two-year renminbi bonds to domestic Chinese institutional investors. Asian Nikkei Review
Chinese bank defers $600 million HK IPO after regulator questions its Hanergy loan. The Hong Kong Exchange is scrutinizing Bank of Jinzhou’s more than $1 billion credit line extended to Hanergy Group, which, in turn, is under investigation by the city’s SFC for alleged stock manipulation. The Wall Street Journal (paywall)
Chinese businessmen more optimistic. The latest MNI China Business Indicator rose 7.6% this month to 53.5, the highest reading since January. The central bank’s rate cuts helped boost business sentiment as it helped increase their access to credits. Financial Times (paywall)
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