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China Property Curbs Weigh on Asian Stocks

This is a transcript of top stories presented by China's CCTV Business Channel as produced by CNBC Asia Pacific.

Hello to our viewers all over China.

You're watching “Asia Market Daily”, co-produced by CCTV Business Channel and CNBC, first in business worldwide.

I am Saijal Patel and here are the top stories across Asia today.

Most of North Asia dipping into the red today, with the exception of South Korea up slightly.

While most markets remain cautiously optimistic over the US reporting season, comments out from China's banking regulator today that it will continue to stay tough on lending curbs to cool the property sector, took its toll on the markets.

Shanghai market taking the biggest hit, down more than a percent. Hong Kong shares dipping in and out of the red.

Mainland shares have been one of the worst performers globally this year, down some 25 percent for the year. Some analysts though, say this could be a buying opportunity.

(SOT) Lee Boon Keng, Managing Director, Senior Advisor, Julius Baer:

“I think if you're looking at a place that has corrected, and has done some serious readjustment, this may be a good time to look at some of the companies that have been bashed because people will readjust their portfolios and go back in.”

Over in the rest of Asia, Japan's Nikkei also closed down 0.1 percent.

The steel sector was the worst on board, on worries that China will cut back on steel capacity and that prices could stay sluggish.

Shares like JFE holdings and Nippon steel all down by more than 2 percent.

Aussie stocks also ended the day down 0.7 percent, with miners leading the slide.

Alumina shares however, edged up by 1.3 percent on the back of positive earnings from its US rival, Alcoa. We'll have more on that, later in the show.

Over on the economic front, most central banks in Asia have started on tightening measures as the region shows signs of recovery.

While China has raised bank reserve requirements this year, analysts expect that rate hikes will only kick in during the second quarter of next year.

Lee Boon Keng of Julius Baer tells us why China is remaining cautious, despite inflation not being a threat.

(SOT) Lee Boon Keng, Managing Director, Senior Advisor, Julius Baer:

“Premature to protect against inflation? Is inflation a threat? I don’t' think so. I think the only source for inflation going forward would be a spike in commodities and oil prices. That is very difficult to happen if the Chinese decide that they want to pace how they are going to grow. The new strategy in China with all the revaluation and what not, it really is how they are going to pace growth. What happened 2005, 2007, all the way to 08, and they learnt from that mistake is that they did not pace growth. They were enjoying very strong growth, and they got carried away a little, and that created a commodity bubble that ultimately required a lot of work in terms of adjustments so every central bank right now is very pro active because of the experience that they've had in those periods.”

Some economists however, say it is important for China to continue to keep track of liquidity issues.

(SOT) Tai Hui, Regional Head of Economic Research, SE Asia, Standard Chartered Bank:

“Some expansion of landing in China has certainly led to a lot of liquidity in the property market, and to a lesser extent, the stock market. But that's the same problem or same challenge that every central bank will face when it turn on the tap. The question is given the limited amount of investment opportunities in China and the limited amount of how money can flow out of China frankly, that's an inevitable consequence. So in that sense, i think for Chinese economy, they have to tighten liquidity availability. That they've been doing in the last 6 months, and also I think they need to gradually open up the investment opportunities overseas to let liquidity out of the country out of the system into other markets to alleviate the risk of asset bubbles in China.”

While property prices, especially those in first tier cities like Beijing are falling, Standard Chartered analysts say real estate prices not in danger of collapsing.

Standard Chartered says most developers have a liquidity cushion and land banks that can withstand tighter credit lines.

Corporate earnings in the US kicked-off yesterday, with the US's biggest aluminum producer Alcoa being the first to report.

Alcoa's second quarter earnings coming in better-than-expected but what surprised markets was its bullish forecast for this year.

Alcoa has raised its growth forecast for the year to 12 percent from 10 percent.

Some analysts had not expected such a bullish outlook, as the US economy still remains soft.

(SOT) Helen Lau, Senior Analyst, UOB Kay Hian:

“The global demand's mainly driven by the emerging markets, like China, overall maybe, India. Overall, the huge demand is still there. But then I don't see demand recovering in Europe and US. And also, the utilization rate in Europe and US is also relatively low, so actually that is a concern. And also, starting from the third quarter, you see aluminum prices start to fall. So actually we don't think the third quarter will be any better than the second quarter. That means within the third quarter may underperform than the second quarter.”

On China, Chairman and CEO Klaus Kleinfeld says the country has been doing well in managing its supply and demand factors, by taking production offline when required

An example he cited was how China cut output by some 27 percent last year, when Shanghai aluminum prices fell

Alcoa says China remains "an important market for Alcoa".

The China market, of course, has provided Alcoa with average growth rates of 29-percent over the past 5 years.

It's also expected to create sales of around 1-billion for Alcoa this year.

While China will continue to move towards higher value added industries and cut back on energy consuming sectors, Alcoa says China will still take up more than half of its global demand this year at 16.5 million tones.

Going forward, Alcoa says it expects auto growth in China to grow by 10 to 15 percent versus last year. It also expects commercial property sales to be up by the same this year.

Some analysts though are less enthused over the property sector given the government's tightening measures and they say this will also affect demand for other metals such as steel.

(SOT) Helen Lau, Senior Analyst, UOB Kay Hian:

“The steel prices continue to rise, yes, the inventory is high, and also starting from June, China started to cool down the property market so therefore you'll see the slowdown in over-demand, so steel prices is going down.”

Well, that wraps up today's business highlights.

I'm Saijal Patel from CNBC - first in business worldwide.

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