Stock TalkMarket Wrap: Mainland banks drop on reports that new loan growth is stagnant

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An investor looks at stock prices in Shanghai. Fears of a hard landing in China are casting a pall over stock markets elsewhere in the region, particularly Hong Kong. Photo: AP

Published: 4:43pm, 4 Sep 2012Updated: 5:43pm, 4 Sep 2012

Mainland banks dropped on Tuesday, dragging down the broader market, after A shares lost ground and a newspaper reported that new loan growth at the nation’s big four banks had been flat in August, which investors fear could point to further economic softening.

A source indicated that the big four banks lent 220 billion yuan in new loans in August, virtually unchanged from July, according to mainland business paper 21st century Business Herald, and analysts said this might reflect banks' reluctance to advance money in an uncertain economic environment.

“Lenders are being cautious about making new loans,” Castor Pang, head of research at Core Pacific-Yamaichi, told SCMP.com. “Every indicator seems to be pointing to a negative direction for Chinese lenders.”

Bank of China (3988.HK) lost 1.06 per cent to close at HK$2.80. China Construction Bank (0939.HK) lost 0.98 per cent to finish at HK$5.05. The benchmark Hang Seng Index lost 0.66 per cent to close at 19,429.91.

However Pang said the news is not a big surprise. “What really dented market sentiment and curbed turnover is the growing risk of a hard landing for China, which just seems to keep rising,” he said.

The Shanghai Composite Index lost 0.75 per cent to close at 2,043.65, as property developers, banks and steelmakers dropped. The gauge is the world's worse performing major market over the past year as of Tuesday’s close.