Chinese shares fell on Wednesday, backing away from a key resistance level again as investors continued to shy away from large-cap banking shares due to concern about more policy moves to rein in lending. The Shanghai Composite Index closed 1.3 percent lower at 2,652.5, with banks generally weaker amid talk that regulators were considering higher deposit rates to help fight inflation and more stringent capital requirements at the country's top banks.
Hong Kong's Hang Seng index edged up 0.1 percent to a one-month high but gains were capped by the weak mainland market and resistance at the index's August high. An academic adviser to China's central bank told a panel at the World Economic Forum in Tianjin that banks' deposit rates needed to be raised to help fight inflation.
China's banking regulator was considering raising capital adequacy ratios at banks deemed "systemically important" to as much as 15 percent, Bloomberg reported, citing a person familiar with the matter. Cheng Yi, an analyst at Xiangcai Securities, said the broader index wouldn't rise while large caps were under pressure, and that small and medium-sized companies faced profit-taking as investors' appetite faded.
Sentiment also took a hit after the index failed to breach 2,700 for the seventh time in the past month. Bank of China Ltd slipped 0.9 percent, while China Merchants Bank fell 1.8 percent. Mainland shares have seen far steeper falls than Hong Kong-listed counterparts this year and that has pushed them deeper into discount territory versus Hong Kong's H-shares, reversing a multi-year trend.
Turnover in Hong Kong fell as the benchmark Hang Seng Index pulled back from resistance at last month's high around 21,800, having retraced its entire drop from the August 9 high to August 31 low. The index has risen 6.5 percent this month, accompanied by rising turnover, as strong economic data from China and the United States prompted investors to put money back into the market.
That rally paused on Wednesday, with the index running into resistance and a lacklustre performance on Wall Street overnight. Investors were keen on taking profits in certain sectors that had outperformed this month, such as telecoms and resources, analysts said. China Unicom, up 12 percent this month before Wednesday's fall, closed 2.3 percent lower, while rival China Mobile slipped 0.2 percent.
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