Chinese banks dragged Hong Kong and China shares below key technical support levels in early Wednesday trade after Singapore state investor Temasek sold a combined $3.6 billion worth of its holdings in two Chinese banks.
This comes after ratings agency Moody's warned on Tuesday of a possible ratings downgrade for Chinese banks , whose stock prices have been battered by fears that slower growth in the world's second-largest economy could set off a wave of loan defaults and hobble its banking system.
The benchmark Hang Seng Index closed down 0.40 percent to 22,657.74 points at midday, dipping below its 250-day moving average, which has offered support for the last two sessions.
Bank of China and China Construction Bank (CCB) the biggest drags, with volumes spiking to almost 20 and 8 times their 30-day averages at midday respectively after Temasek, which has about $152 billion under management, trimmed its exposure to the financial sector ahead of its annual review planned later this month.
Other "Big Four" peers also lost on the day so far. Agricultural Bank of China (ABC) shed 3.83 percent, while Industrial and Commercial Bank of China (ICBC) lost 2.19 percent.
Also weighing on the stocks was the impending expiry of their cornerstone investors' lock-up period, with Bank of America able to sell CCB shares from late August.
"This is a potential overhang that may not necessarily be a long term reflection of its fundamentals," said Ismael Pili, Macquarie's head of Asia financial research.
"But certainly, in terms of share prices, if there's another big (investor) selling down, it's going to create a big weight."
SHANGHAI DIPS BELOW KEY TECHNICAL SUPPORTS
Temasek's selloff in Hong Kong also weighed on the Shanghai Composite Index , dragging the benchmark down 0.8 percent to 2,794.05 points, below its 250-day moving average which has offered support for the last two sessions.
Chinese shares have risen around 7 percent from a nine-month low hit last month, hitting a six-week high on Tuesday after Premier Wen Jiabao's comments that inflation was under control raised hopes that the government would ease up on its monetary tightening policy.
Bank of China dipped 1.68 percent, while China Construction Bank lost 1.22 percent as all banks listed on the Shanghai and Shenzhen market fell with the Shanghai financial sector sliding 1.38 percent.
"Recently, a lot of negative news hurt investor confidence in banking shares, so it will add pressure on the index," said Wen Lijun, an analyst at Nanjing Securities. "But we still expect the rebound has not finished."
Wen and several other analysts said tightening liquidity in the market also pulled down the index as the benchmark money market rate -- the seven-day government bond repurchase rate -- spiked over 50 basis points on Wednesday.
This comes after ratings agency Moody's warned on Tuesday of a possible ratings downgrade for Chinese banks , whose stock prices have been battered by fears that slower growth in the world's second-largest economy could set off a wave of loan defaults and hobble its banking system.
The benchmark Hang Seng Index closed down 0.40 percent to 22,657.74 points at midday, dipping below its 250-day moving average, which has offered support for the last two sessions.
Bank of China and China Construction Bank (CCB) the biggest drags, with volumes spiking to almost 20 and 8 times their 30-day averages at midday respectively after Temasek, which has about $152 billion under management, trimmed its exposure to the financial sector ahead of its annual review planned later this month.
Other "Big Four" peers also lost on the day so far. Agricultural Bank of China (ABC) shed 3.83 percent, while Industrial and Commercial Bank of China (ICBC) lost 2.19 percent.
Also weighing on the stocks was the impending expiry of their cornerstone investors' lock-up period, with Bank of America able to sell CCB shares from late August.
"This is a potential overhang that may not necessarily be a long term reflection of its fundamentals," said Ismael Pili, Macquarie's head of Asia financial research.
"But certainly, in terms of share prices, if there's another big (investor) selling down, it's going to create a big weight."
SHANGHAI DIPS BELOW KEY TECHNICAL SUPPORTS
Temasek's selloff in Hong Kong also weighed on the Shanghai Composite Index , dragging the benchmark down 0.8 percent to 2,794.05 points, below its 250-day moving average which has offered support for the last two sessions.
Bank of China dipped 1.68 percent, while China Construction Bank lost 1.22 percent as all banks listed on the Shanghai and Shenzhen market fell with the Shanghai financial sector sliding 1.38 percent.
"Recently, a lot of negative news hurt investor confidence in banking shares, so it will add pressure on the index," said Wen Lijun, an analyst at Nanjing Securities. "But we still expect the rebound has not finished."
Wen and several other analysts said tightening liquidity in the market also pulled down the index as the benchmark money market rate -- the seven-day government bond repurchase rate -- spiked over 50 basis points on Wednesday.
