China stocks fall as property slump deepens; Hong Kong up
Reuters · 09/15 08:29
China stocks fall as property slump deepens; Hong Kong up

Updates to market closing levels

- China stocks closed lower on Friday after data showed a slump in the country's property sector worsened in August, even as other parts of the economy showed some tentative signs of stabilising.

However, Hong Kong shares rose and the yuan climbed to its strongest in two weeks against the dollar following the data.CNY/

The blue-chip CSI 300 Index .CSI300 ended 0.7% lower after rising as much as 0.4% earlier, while Hong Kong's Hang Seng Index .HSI climbed 0.8%.

For the week, the CSI 300 retreated 0.8% while the Hang Seng slipped 0.1%.

China's industrial output and retail sales growth in August both beat expectations, suggesting a recent flurry of support measures may be starting to slowly stabilise its wobbly economic recovery.

But conditions in the crisis-hit property sector worsened, with deepening falls in home prices, property investment and sales, highlighting that more support will be .

The People's Bank of China (PBOC) said on Thursday it would cut the reserve requirement ratio (RRR) for all banks, except those that have implemented a 5% reserve ratio, by 25 basis points (bps) from Friday.

"We think this moderate RRR cut is a further sign that the PBOC and top policymakers have become increasingly concerned about the ongoing economic downward spiral," said Ting Lu, chief China economist at Nomura.

Shares in mainland-listed energy .CSIEN and consumer staples companies .CSICS lost roughly 1% each. Meanwhile, healthcare .CSIHCSI and semiconductors .CSIH30184 both climbed more than 1.5%.

In Hong Kong markets, tech giants .HSTECH climbed 0.5% and healthcare firms .HSCIH advanced 2.2%.

China has in recent months introduced a slew of measures to boost market sentiment, but they have failed to drive a sustained rally in the stock market.

Some analysts say the RRR cut is still enough to revive growth and investor confidence, pointing to the decline in the mainland stock benchmark .CSI300 on Friday.

Foreign investors sold a 2.4 billion yuan ($330.24 million) of Chinese shares via the Stock Connect, the fourth selling day in a row.

"Although these easing measures are very welcome, they are definitely enough to turn things fully around ... the real problem is the lack of effective credit demand instead of lack of credit supply," Nomura's Lu said.

Goldman Sachs expects further policy easing, including another 25 bps RRR cut and a 10 bps policy interest rate cut in the fourth quarter, as well as further property policy easing such as relaxations of home purchase restrictions and downpayment ratio cuts in large cities.

A fund manager
by the Bank of America earlier this week showed investors believe Chinese real estate is the most likely source of a global systemic credit event and are at their most pessimistic on China growth prospects in over a year.

($1 = 7.2674 Chinese yuan)

(Reporting by Shanghai Newsroom; Editing by Lincoln Feast and Kim Coghill)