China Stocks Give Up Gains On Rising Bad Debts

Higher starts for both the Hong Kong and Shanghai share markets, brought on by Monday's launch of the Stock Connect program, had almost disappeared half an hour into trading, with concern surfacing as new data out of China showed the bad-debt ratio for major banks had jumped to a four-year-high. The Hang Seng Index moved off its 0.9% opening gain to trade with a loss of 0.5%. Over on the mainland, the Shanghai Composite Index also gave up most of its initial advance of 1.2% to trade with a gain of just 0.2%. Earlier in the morning, Hong Kong and Shanghai authorities announced that the long-awaited Stock Connect, allowing direct trade between the two markets, had officially started, allowing foreign individudal investors to buy mainland Chinese stocks for the first time ever. However, a day earlier, statistics from China's top banking regulator showed that banks' non-performing loans was higher as of the end of September, marking a 12th consecutive quarter of rising bad loans. The non-performing-loan ratio climbed to 1.16%, marking the highest level in four years. Chinese banks suffered broad-based declines out of the open, with Bank of Communications Co. sliding 1.9%, China Citic Bank Corp. retreating 1.8%, China Merchants Bank Co. falling 1.1%, and Industrial & Commercial Bank of China Ltd. skidding 1%. Major Chinese developer and benchmark-index component China Overseas Land & Investment Ltd. gave up 1.2%, while rival China Resources Land Ltd. , also an index componenent, pulled back 0.9%. However, several local Hong Kong banks gained, with BOC Hong Kong Holdings Ltd. [HK:2388], the only clearing bank for yuan transactions in Hong Kong, rising 0.4%. And in Shanghai, Kweichow Moutai Co. , which had features on Goldman Sachs's stock-pick list for the opening of the Stock Connect, rose 3%.