Equities slide on tight cash, Ping An fund plan

SHANGHAI - Stocks on the Chinese mainland fell for a third day as a cash crunch weighed on equities after banks hoarded cash to meet year-end reserve-ratio requirements and Ping An Insurance (Group) Co plunged on fundraising plans.

Ping An, China's second-biggest insurer, slid 5.2 percent on a plan to sell as much as 26 billion yuan ($4.1 billion) of bonds after business expansion brought down its capital adequacy. China Vanke Co led a decline for developers as cities including Shanghai extended the period limiting home purchases.

"The economy and the capital markets are still facing a credit crunch as a result of two years of monetary tightening," said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management Co, which manages about $120 million.

"The economy is experiencing a down cycle. Stocks are not a place to put money until economic growth picks up again."

The Shanghai Composite Index fell 1.1 percent to 2191.15. It rose as much as 1 percent after Premier Wen Jiabao pledged to help exporters and small companies. The CSI 300 Index slid 1.6 percent to 2339.11.

The Shanghai Composite has fallen 6.1 percent in December as concern about an economic slowdown overshadowed the first cut in reserve requirement ratios in three years on Nov 30.

The nation will keep its export policies such as tax rebates "basically stable" next year and the government will mainly use fiscal spending to support "structural tax cuts", Wen was cited as saying in a statement posted on the central government's website on Tuesday. Slowing growth and elevated prices are adding to the difficulty in managing the economy, he said.

A gauge of 34 property stocks in the Shanghai Composite Index dropped 1.9 percent, its first decline in four days. Vanke, the nation's biggest listed property developer, fell 2.7 percent to 7.30 yuan. Poly Real Estate Group Co, the second biggest, lost 1.7 percent to 9.91 yuan. China Merchants Property Development Co retreated 3.1 percent to 17.49 yuan.

Shanghai will continue to implement home purchase limits next year, the city government said on Tuesday, joining Qingdao, Guangzhou and Shenzhen in making similar moves.

Property sales may fall between 3 percent and 6 percent next year and average prices are likely to fall between 1 percent and 4 percent, Soufun Holdings Ltd, the country's biggest real estate website owner, said in a statement.

China's national pension fund invested more than 10 billion yuan in 20 stock funds last week, Shanghai Securities News reported on Wednesday, without saying where it got the information. Dai Xianglong, chairman of the National Council for Social Security Fund, suggested that local social security funds be allowed to buy equities, the newspaper said.

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