Chinese stocks drop

Chinese stocks slipped 0.62 percent on Friday in shrinking turnover, marking their first weekly decline in six weeks with blue chips soft on worries about a possible tightening of liquidity in the market. The Shanghai Composite Index ended at 2,448.595 points, a two-week closing low and a loss of 2.2 percent for the week. The index managed to hold above key support at the 250-day moving average, now at 2,431 points, which it briefly breached on Thursday.
Losing Shanghai A shares outnumbered gainers by 621 to 280. Turnover in Shanghai A shares shrank to a two-week low of 108.4 billion yuan ($15.9 billion) from Thursday's 113.0 billion yuan. The benchmark index tumbled at mid-week after reaching an eight-month high, knocked by mounting worries that authorities may take a stricter stance on lending, which had surged during the first quarter of the year and helped to feed ample market liquidity.
The official China Securities Journal reported on Friday that China's banking regulator will step up its supervision to help ensure that bank loans are used for their intended purposes and reach the real economy, quoting the head of the regulator's statistics division.
"The market lacks any strong stimulus for a rally but the index has support at the 250-day moving average," said CITIC-Kington Securities analyst Qian Xiangjing. He expected sentiment to remain sluggish for the next several days.
Rumours had also swirled in the market that initial public offerings may resume as early as next month after a suspension since last September, although the official Securities News on Friday quoted an unnamed securities regulator as saying he had not heard about a near-term resumption. "Sentiment remained cautious because of liquidity concerns, but the index seems to be holding up for the moment after the denial of the (IPO) rumours which hit sentiment in the latter half of the week, and the market is showing signs of stabilising," said Xiangcai Securities analyst Li Shiming.
Financial shares were weak, with Industrial & Commercial Bank of China, the country's biggest lender, sinking 1.23 percen to 4.02 yuan. Shenzhen Development Bank outperformed, up 0.79 percent at 15.33 yuan after posting a 12 percent rise in first-quarter net profit on rising loan demand, despite a slowing economy and shrinking interest margins. Gold shares soared in the afternoon after China revealed its gold reserves had risen 454 tonnes since 2003, becoming the world's fifth-largest and signalling that the country was likely to buy more of the metal. Zhongjin Gold jumped 7.37 percent to 59.61 yuan.
Non-ferrous metal shares hit by profit-taking, with Yunnan Copper losing 4.05 percent to 19.43 yuan after climbing 5.91 percent on Thursday. China Shipping Development dropped 4.87 percent to 12.89 yuan after saying its net profit in the first quarter fell 81 percent.