Hong Kong, China shares lower

Chinese banks dragged shares in Hong Kong and Shanghai below key technical support levels on Wednesday after Singapore state investor Temasek Holdings (Private) Ltd sold off a combined $3.6 billion stake in two of the China's top banks. More weakness may be in store for Chinese banks and benchmark indexes in the near-term, as lock-up periods on holdings by cornerstone investors in Agricultural Bank of China (ABC) and China Construction Bank (CCB) are set to expire in the next two months.
The Hang Seng Index closed down 1.01 percent at 22,517.6 points, below its 250-day moving average, which has offered support for the last two sessions. The Shanghai Compostive Index finished down 0.2 percent at 2,810.5 points, after hitting a six-week high on Tuesday. CCB and Bank of China were the biggest drags on the Hang Seng, sliding 3.2 percent and 3.6 percent respectively after Temasek, which has about $152 billion under management, trimmed its exposure to the Chinese financial sector ahead of its annual review planned later this month.
Volumes in CCB and Bank of China spiked to almost 21 and 8 times their 30-day averages as the stake selldown added to concerns about the Chinese banking sector. Ratings agency Moody's warned on Tuesday of a possible ratings downgrade for Chinese banks, whose stock prices have been battered by fears that slowing growth in the world's second-largest economy could set off a wave of local government loan defaults.
CCB Chairman Guo Shuqing played down the risks from these debts for his bank, telling an academic forum in Beijing that a bailout by the Chinese central government was unnecessary. Bank of America has a 10.6 percent stake in CCB, and there has been speculation it may sell off a majority of that stake after its lock-up period ends in late August. China's other "Big Four" banks also suffered heavy losses, with Industrial and Commercial Bank of China (ICBC) falling 2.5 percent and Agricultural Bank of China (ABC) tumbling 4.8 percent.
In Shanghai, an afternoon surge in electric power companies helped the main index bounce off its 250-day moving average, offsetting some of the drag from retreating bank shares. All banks listed on the Shanghai and Shenzhen markets fell, with the Shanghai financial sector down 0.8 percent. Bank of China dipped 1.3 percent, while China Construction Bank lost 1.4 percent. Electric power companies rebounded from early losses, with analysts citing low valuations and expectations of strong summer power demand. Sichuan Xichang Electric Power Co rose by its daily maximum limit of 10 percent.