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China Stocks Set to Drift on Policy Inaction

Cheng Lei|Reporter, CNBC Asia Pacific
Monday, 18 Jun 2012 | 7:33 PM ET
OTHK | Asia Images | Getty Images

The Chinese market may continue its sleepy trading seen in the past few weeks, due to the absence of major policy announcements.

The Shanghai Composite's modest gain of 0.4 percent paled in comparison to other Asian markets' post-Greek election rallies, the benchmark closed at 2,316.05 on Monday amidst light turnover.

Market Factors:

Analysts say as the end of June beckons with the expected rush by banks to attract savings in order to meet loan to deposits requirements, liquidity may be tighter in the equity market for the next two weeks.

China's ministry of housing and rural urban development says it will support the strict implementation of housing credit policies, the comments follow denials by the central bank and the banking regulators about perceived credit loosening towards mortgage lending.

The National Pension Fund opened new A-share trading accounts in May, the first time in eight months, this may lift investor confidence as it's a sign even the government sees current valuation levels as being attractive.

Stocks to Watch:

Alternative Energy Plays

Heilongjiang, a province in northeastern China, has issued regulations to tighten control over development of alternative energy, the rules state that developers must seek local meteorological authorities' approval first and that energy developed belongs to the state. These are the first rules governing alternative energy development from a local government and have sparked concerns such regulations, if rolled out nationwide, would increase costs for alternative energy firms.

—By Cheng Lei, CNBC Asia Pacific