China’s key stock index was down 0.6 percent by midday Monday, with
volume slipping further as tight liquidity conditions worsened by
Agricultural Bank of China’s looming stock offering starved the market
of momentum for near-term gains.

The Shanghai Composite Index
(SSEC) ended the morning at 2,537.2 points, slipping for a fourth day in
a row after a rally at the start of last week on the yuan’s surge.

Analysts
said the index was likely to stick to its recent narrow range unless it
was jarred by a major news event, while tightening liquidity would
continue to restrict volume.

“The low volume is due to the lack
of liquidity in the market. With Agricultural Bank’s listing set to
take a lot of funds from the market, the liquidity situation is likely
to continue to tighten,” said Wen Lijun, analyst at Nanjing Securities.

Agricultural
Bank is due to set the price range for the Shanghai portion of its dual
Shanghai-Hong Kong offering later on Monday.

Shanghai’s
benchmark stock index has faltered repeatedly at the psychologically key
2,600-point mark that has thwarted attempts to rally this month,
although tests of the downside have found support around 2,500 points.

China’s
stock market remains one of the world’s worst performers this year,
down more than 23 percent after the authorities set policies to ease
speculation in the red-hot property sector. The index is down 18 percent
on the quarter.

Heavily weighted banking stocks were mixed,
with slightly more than half of those listed on the Shanghai and
Shenzhen exchanges rising after recent declines.

Merchants Bank
was up 1.5 percent, Bank of Communications gained 0.8 percent and
Pudong Development Bank rose 0.4 percent.

Heavyweight
Industrial and Commercial Bank of China was 0.7 percent lower.

Volume
remained thin, falling to 21 billion yuan from Friday morning’s 25
billion yuan.

Hong Kong Steady
Hong
Kong stocks recovered from the weekly low they touched on Friday with
defensive counters such as telecoms and utilities lifting the benchmark
Hang Seng Index slightly higher.

China Unicom, the top gainer,
rose 4.9 percent and China Resources Power rose 3.3 percent.

Property
shares received a boost after local newspaper, The Standard, reported
that developer Sino Land sold nearly HK$3 billion worth of apartments on
Saturday in a project in the city. Sino Land rose 1.7 percent.

The
Hang Seng Index was up 0.35 percent or 72.42 points at 20,763.21. The
China Enterprises Index rose 0.21 percent to 11,890.19.

Chinese
thermal coal companies fell after the National Development and Reform
Commission on Friday asked major coal miners to keep term coal prices
steady to help control inflation, a trader at a European bank said.

Yanzhou
Coal was down 5.3 percent while China Coal fell 5.2 percent.
(US$1=HK$7.76=6.83
yuan)