Economists fear slower new-loan growth foreshadows upcoming data

Shares of securities companies slumped on Monday, as market worries rise amid worse-than-expected economic indicators and a number of restricted shares were freed.

Citic Securities, one of China's most profitable investment banks, saw its shares drop 9.1 percent to 10.99 yuan ($1.7) amid reports that its chairman was "taken away" for investigation after the company suffered a loss of 2.9 billion yuan in overseas investments. However, Citic Securities' board secretary, Zheng Jing, denied the reports as "untrue".

Everbright Securities Co Ltd and Southwest Securities both saw their prices fall more than 9 percent amid a 1.51 percent drop by the major Shanghai Composite Index. Haitong Securities Co Ltd and Huatai Securities plummeted more than 8 percent, while the sector as a whole dropped more than 6 percent.

"Although the market has been expecting impetus from securities companies' creative businesses, the positive influence is very limited at present. Meanwhile, the half-year results of securities companies were not good, causing the price slump," said Zhang Qi, a stock analyst with Haitong Securities Co Ltd.

"On top of that, the market's confidence has been chilled by the recently released mid-term economic figures. As it will still take some time for the economy to pick up, the securities companies will accordingly take their time to regain momentum," he said.

The Shanghai index declined by 1.51 percent, or 32.74 points, to 2136.08 points on Monday, the biggest daily drop since July 16. The index is down 2.28 percent this month and 2.88 percent year-to-date.

Banks in China extended 540.1 billion yuan local-currency new loans in July, up 48.5 billion year-on-year, the People's Bank of China, the central bank, said last week.

That is the lowest monthly level since October and much lower than the market consensus of 700 billion yuan.

Economists fear that slowed new loan growth is an ominous precursor for other upcoming economic data.

Meanwhile, the securities regulator has said that up to 3.1 billion of restricted shares will be freed for public trading this week in both Shanghai and Shenzhen. In China, major shareholders are required to hold their shares for a set period of time after an IPO, as a show of commitment to the company.

For Citic Securities, a large part of the overseas loss is attributable to its recent acquisition of the Hong Kong-based brokerage CLSA Asia-Pacific Markets from its struggling parent, France's Credit Agricole SA, for $1.25 billion, analysts say.

"The price offered was too high, and there is expected to be a clash of corporate cultures. The prevailing debt crisis in Europe is very likely to affect the securities companies," said Huang Sheng, a professional investor.

"One thing leads to another, and thus institutional investors are going short."

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(China Daily 08/14/2012 page15)