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China Stocks Lower as Weakness Takes Hold

02/22/2013 | 04:26am US/Eastern

SHANGHAI--China's shares ended lower Friday, adding to Thursday's losses, weighed by an extended pullback in financial stocks, while concerns over liquidity conditions also offered investors an excuse to exit the market.

The benchmark Shanghai Composite Index, which tracks both A and B shares, ended down 0.5%, or 11.79 points, at 2314.16. The index lost 4.9% this week, the first week in the Year of Snake, posting the largest weekly drop since the week ended May 27, 2011.

The Shenzhen Composite Index fell 0.2%, or 2.32 points, to 947.69.

Analysts said they expect the market to stay weak in the absence of fresh positive news, tipping an immediate support for the Shanghai index at 2280.

"The market may enter into a consolidation pattern after an abrupt correction, and investors are eyeing potential fresh cues from the upcoming annual meetings of the Chinese legislature," which are due in early March, said Jacky Zhang, an analyst with Capital Securities.

The market may have topped, at least in the short run, given signs of monetary tightening from the central bank, said Southwest Securities analyst Zhang Gang.

The People's Bank of China on Tuesday used a key mechanism aimed at withdrawing liquidity from the banking system for the first time in eight months, in order to ease potential inflationary pressure.

Beijing's recent reiteration of property tightening policies is also aimed to fend off potential inflation risks which could hurt the market in coming months, Zhang Gang added.

Financial stocks continued their pullback Friday after a recent surge, with China Minsheng Banking Corp. off 2.8% at CNY9.50, Ping An Insurance (Group) Co. of China losing 1.7% to CNY45.96, while Citic Securities fell 1.4% to CNY13.71.

Auto makers succumbed to profit-taking after being among the best performers over the past few months.

Anhui Jianghuai Automobile fell 6.7% to CNY7.94, Chongqing Changan Automobile declined 4.5% to CNY8.10, and FAW Car dropped 4.1% to CNY8.30.

The March index futures contract, the most actively traded of the four index futures contracts traded in China, ended 1.0% lower at 2593.2.

The futures are referenced to the CSI-300, an index of 300 Shanghai- and Shenzhen-listed yuan-denominated A shares. The CSI-300 ended down 0.5% at 2596.60.

Write to Amy Li at amy.li@dowjones.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

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