Shanghai - China stocks fell on Tuesday
morning as Beijing's move to tighten supervision of shadow
banking activities and persistent liquidity concerns restrained
risk appetite.
Hong Kong stocks also lost ground, as Wall Street strength
was eclipsed by weakness in mainland companies listed in Hong
Kong.
The blue-chip CSI300 index fell 0.6 percent, to
3,310.63 points at the end of the morning session, while the
Shanghai Composite Index fell 0.6 percent, to 3 310.63
points.
The benchmark Hang Seng index dropped 0.3 percent, to
21,768.52 points, after hitting a four-and-a-half-month low on Monday.
The Hong Kong China Enterprises Index, which tracks
Hong Kong-listed Chinese firms, lost 0.7 percent, to 9,313.70
points, in line with mainland peers.
China's central bank said on late Monday it would tighten
supervision of shadow banking businesses by including
off-balance sheet wealth management products (WMPs), widely
viewed as a source of financial risk, into its risk-assessment
framework next year.
The move represents another step by Beijing to rein in
speculative credit growth in an effort to prevent asset price
bubbles.
Risk appetite was also curbed by persistent weakness in the
bond market. The price of China's 10-year treasury futures for
March delivery touched a record intraday low on Tuesday.
Nearly all sectors lost ground in China, with property
and energy stocks leading the decline,
both down more than 1.3 percent.
"The markets were suffering short-term weakness due to
supervisors' tightening of the financial system", said Guodu
Securities analysts Xiao Shijun.
He said Beijing's signal to keep monetary policy "neutral"
next year, top leaders' resolution to curb asset bubbles, and
the central bank's move to tighten the grip on shadow banking
businesses have all combined to sideline investors.
"Although Beijing has been working on deleveraging over the
past year, they have suddenly escalated their efforts recently,
putting the market under pressure," he said.
In Hong Kong, sector performance was mixed, with gains in
telecommunication stocks cancelled out by losses in
financial stocks, even as Wall Street strength
overnight offered some support.