China's key stock index closed up 0.22 percent on Monday, with banking stocks gaining as the market shrugged off a surprise rate hike in India that had pushed other major Asian markets lower. In Hong Kong, shares of rate-sensitive property and banking shares led the benchmark index lower.
The Shanghai Composite Index ended the day up at 3,074.576 points, its highest close in nearly three weeks, after edging lower early in the session but holding to a narrow range. "The India rate rise does not have a very large impact on China's market," said Xu Yinhui, analyst at Guotai Junan Securities.
Trading in banks helped to lift turnover to 113 billion yuan ($16.55 billion) from Friday's 103 billion yuan, while gaining Shanghai stocks outnumbered losers by 549 to 321. Banks were the most actively traded stocks as large-cap shares in the sector attracted interest from institutional investors. Industrial and Commercial Bank of China closed up 0.21 percent at 4.87 yuan, Pudong Development Bank was up 1.88 percent at 22.21 yuan.
China's stock regulator said late on Friday that it had approved the first batch of six brokerages to conduct business in a pilot scheme for margin trading and short selling of stocks that is due to be launched shortly. State media reported the reform could pump 30 billion to 90 billion yuan of fresh funds into the market, but the reports did not help brokerage stocks because of the high risks involved in the new business, traders said.
Haitong Securities, one of the six brokerages selected, closed down 0.64 percent at 17.16 yuan and Citic Securities closed down 0.57 percent at 28.07 yuan. "Despite last week's rebound, the Chinese market has not yet found a new direction and is likely to continue range-bound trading in the near term in the absence of major domestic news," said Qian Qimin, deputy head of research at Shenyin & Wanguo Securities in Shanghai.
Jiangsu Changle Electronics was the most actively traded share for a fourth straight trading day, rising 1.49 percent to 10.93 yuan, despite a lack of publicly announced news about the firm. State media reported that speculative "hot money" was fighting a battle over the shares. Hong Kong's benchmark Hang Seng Index ended down 2.1 percent at 20,933, the lowest since March 5. Turnover fell for a third day to HK$55.5 billion ($7.2 billion) from Friday's HK$58.7 billion.
"Market sentiment is not too good and the drop is driven by the interest rate hike in India," said Linus Yip, strategist at First Shanghai Securities. "Another focus in Hong Kong this week is the results announcement from Chinese banks, so investors are cautious ahead of that." Chinese banks are expected to post a 13 percent rise in profit in 2009, the slowest pace since at least 2004.
Banks, the most actively-traded sector, and property plays slipped. Industrial and Commercial Bank of China fell 2.7 percent and Hang Lung Properties dropped 4.6 percent. HSBC declined 2.1 percent. The Wall Street Journal said the lender is still grappling with surprime businesses in the US. PetroChina shed 2.7 percent and aluminium maker Chalco dropped 4.1 percent, after prices of commodities including oil fell due to a stronger US dollar.
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