Shanghai shares drop on capital adequacy concerns

The Shanghai Composite Index fell 3.5% to 3,223.526 points yesterday amid fears that more stringent capital adequacy requirements for banks would prompt lenders to sell shares, the Financial Times reported. It was the steepest drop for the market in nearly three months. BNP Paribas estimated the requirements outlined by the China Banking Regulatory Commission mean China’s 11 largest banks will have to raise at least US$43 billion or face limits on banking operations and expansion plans. Bank of China alone is likely to have to raise US$20 billion to maintain its capital adequacy rates, BNP Paribas said. Analysts said the share sell-off also reflected concerns over a departure from a loose monetary policy, as well as simple profit-taking; the Shanghai index has risen 11% in November.