Black Friday for China stocks but metals not so heavy
LONDON: Chinese shares slumped 5 percent yesterday, hit by regulatory and industrial sector worries, though it wasn’t enough to derail the first weekly rise for metals like copper and zinc since early October.
The Shanghai Composite index and the CSI300 both saw their biggest one-day drops in more than three months and ensured it was set to be a subdued post-Thanksgiving session for Wall Street.
Europe had a flat feel too. Britain’s FTSE 100 was down 0.2 percent by 1230 GMT though 0.2 percent gains for France’s CAC40 and Germany’s DAX left the pan-regional FTSEurofirst 300 heading for a token weekly gains. “There is clearly a risk that China will try and devalue the currency further,” said Ankit Gheedia, equity and derivative strategist at BNP Paribas.
“(However) Europe is still trading on the ECB next week, which is why the market is relatively resilient,” he said referring to expectations of another round of stimulus.
The intensive selling in China had come amid signs its securities regulator was making a fresh clampdown on leveraged buying and combined with data showing a 4.6 percent drop in profits among big industrial firms. The mining industry was the laggard with profits down 56.3 percent in the first 10 months of the year. Overall it was also the fifth straight monthly drop in profits, underscoring the pressure currently on China’s giant economy.
The slump in Shanghai stocks brought a 25 percent rebound rally since late August to a shuddering halt and contributed the lion’s share of a 1.1 percent weekly drop in MSCI’s broadest index of AsiaPacific shares outside of Japan.
Japan’s Nikkei closed down 0.3 percent too though it ended the week marginally highly to extend a winning streak that started in the second half of October.
The jittery China mood ensured euro-zone bond yields, which move inverse to price, nudged lower again as investors also kept positioning for the next salvo of ECB stimulus, expected at the central bank’s Dec. 3 meeting. They are paying more than ever for the privilege of owning shorter-term German, French, Dutch government bonds and yields on benchmark 10-year yields are also sliding again.
“The market is anticipating the ECB to act swiftly and decisively next week,” said DZ Bank strategist Christian Lenk, highlighting bets that Mario Draghi and his colleagues will continue to hike up the cost of sitting on cash for banks.
“If you take the two-year Schatz (German) yield as the benchmark for the (ECB) deposit rate, the market expects a cut in the deposit rate by 20 bps to minus 0.40 percent, which we think is thinkable.” —Reuters
HANGZHOU: An investor walks past a screen showing stock market movements in a stock firm in Hangzhou, east China’s Zhejiang province yesterday. Chinese shares closed down more than five percent on November 27, after inquiries were announced into several major brokerage firms. — AFP