China stocks fall on fresh liquidity concerns, Hong Kong dragged

SHANGHAI: China stocks fell on Thursday, dragged lower by fresh investor worries over signs of liquidity tension ahead of the upcoming Lunar New Year holiday, while Hong Kong was pulled by losses in tech shares.

** Liquidity conditions have been a key market focus in the recent two weeks as some investors were worried policymakers could slowly switch to a tighter monetary policy stance. The volume-weighted average rate of benchmark overnight repo rebounded to above 2% on Thursday morning, showing slight signs of tightness again.

** At the midday break, the Shanghai Composite index was down 1.02% at 3,481.45 points, while China's blue-chip CSI300 index was down 0.81%.

** The smaller Shenzhen index was down 1.8%, the start-up board ChiNext Composite index was weaker by 1.23% and Shanghai's tech-focused STAR50 index fell 2.68%?.

** Short-term funding cost in China started to pick up last week as the central bank refrained from making its usual substantial liquidity injections to meet high demand for cash ahead of the week-long Lunar New Year holidays, which starts on Feb. 11 this year.

** The People's Bank of China said it will keep liquidity reasonably ample and support for an economic recovery in 2021 will be maintained without resorting to a flood-like stimulus, a central banker wrote in magazine article seen on Wednesday.

** Apart from the liquidity concerns, some analysts said as listed companies started to release their preliminary earnings for 2020, some sectors with historically high valuations may face corrections.

** Chinese H-shares listed in Hong Kong fell 1.6% to 11,464.88, while the Hang Seng Index was down 1.45% at 28,882.42.

** In Hong Kong, the sub-index of the Hang Seng index tracking energy shares dipped 0.1% while the IT sector fell 3.4%.

** Alibaba caught some market attention in the morning after its fintech arm Ant Group agreed a restructuring plan with Chinese regulators under which it will become a financial holding company, a source told Reuters, potentially easing founder Jack Ma's regulatory woes.