MARKETS & INVESTING | Cesar Tordesillas, Hong Kong

HK stocks close flat due to China's increased reserve requirement

Hong Kong shares closed flat after China's central bank raised the amount banks must keep in reserve.


The Hang Seng China Enterprises Index rose 55.43 points, or 0.45 percent, to close at 12,488.27.

Three sub-indices gained ground, with the Utilities sub-index rising 0.42 percent, followed by the Properties 0.34 percent, and the Finance 0.22 percent, while the Commerce and Industry fell 0.55 percent.

The slight decline came after the People's Bank of China said on Tuesday afternoon that it was raising banks' reserve requirement ratio by half a percentage point, in a move to address inflation concerns by locking up liquidity in the banking system.

The announcement of the increase, which takes effect on June 20, comes after data issued on Tuesday showed the country's consumer price index rose 5.5 percent in May from a year earlier, up from April's 5.3 percent rise and well above the official full-year target of around 4 percent.

Chinese lender Bank of Communications fell 0.7 percent to 7.41 HK dollars and Bank of China retreated 0.3 percent to 3.94 HK dollars.

Shares of Nine Dragons were down 17.4 percent at 5.65 HK dollars before trading was halted. The drop came after ratings firm Standard & Poor's said it had withdrawn its 'BB' long-term corporate credit rating because it had 'insufficient access' to the company's management.

Bucking the downtrend, Chinese property developers rose because of strong property sales in May. Blue-chip China Overseas Land advanced 1.0 percent to 15.84 HK dollars, while China Resources Land was up 0.9 percent at 13.20 HK dollars.

China's property sales accelerated in May, with commercial and residential property sales totaling 452 billion yuan or about 70 billion U.S. dollars, up 33 percent from a year earlier, accelerating from the 13 percent rise recorded in the January- April period, according to the data from China's statistics bureau issued on Tuesday.

Hong Kong stocks lost 12.08 points, or 0.05 percent, to close at 22,496.00 on Tuesday. The benchmark Hang Seng Index traded between 22,298.47 and 22,642.46. Turnover totaled 68.77 billion HK dollars or about 8.84 billion U.S. dollars.

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