* CSI300 -1 pct; SSEC -1 pct; HSI -0.6 pct
* Money continues to shift into small caps from blue chips
* Banks fall; cleantech, healthcare stocks outperform
By Samuel Shen and Kazunori Takada
SHANGHAI, March 5 (Reuters) - China stocks sagged in thin trading on Thursday, with investors dumping blue chip shares such as banks and real estate firms on worries about the slowing economy.
Premier Li Keqiang told the National People’s Congress (NPC) at the opening of the annual parliamentary meeting that China would target growth this year of around 7 percent, signalling the lowest expansion for a quarter of a century, as “the downward pressure on China’s economy is intensifying.”
He also vowed to fight corruption and pollution, and stressed the need for more painful reforms.
“Expectations of monetary easing have pushed the stocks up to the current level, but for the market to go higher, you need signs that the economy has bottomed out,” said Xia Xiaohui, chairman of Shanghai-based asset manager Liuhe Capital. “So far, I haven’t seen any.”
Both the CSI300 index and the Shanghai Composite Index lost 1 percent, weighed down by financial heavyweights.
But Shenzhen’s ChiNext, which tracks high-growth start-ups, maintained strong upward momentum and ended the morning higher, touching fresh highs.
But with the Nasdaq-style ChiNext having jumped 33 percent this year and reaching valuations of more than 80 times companies’ earnings, investors are becoming increasingly cautious.
“ChiNext has accumulated huge risks,” said Liuhe Capital’s Xia. “I dare not touch it.”
The Hang Seng index dropped 0.6 percent, while the Hong Kong China Enterprises Index lost 0.3 percent, led by banking shares.
China will make a major breakthrough in interest rate liberalisation this year, Chen Yulu, an adviser to the country’s central bank told Reuters on Thursday. His remarks came days after the central bank cut benchmark interest rates while lifting the cap for banks’ deposit rates.
China’s rate cut is negative for banks, especially small and mid-sized leaders, as the move narrowed the spread between deposit and lending rates, at a time when banks’ pricing power is weakening, rating agency Moody’s Investors Service said in a report on Thursday.
But cleantech stocks outperformed the broader market, after China’s top state planning agency pledged on Thursday to accelerate policies to promote cleaner and renewable sources of energy.
Chinese healthcare stocks fell less than the broader market, dipping 0.3 percent, as analysts said the market is expecting supportive policies. (Editing by Jacqueline Wong)