Chinese stocks near 34-month lows
CHINESE shares closed at their lowest level in almost 34 months yesterday on fears that the Chinese economy will cool further, with strong turnover a bearish sign pointing to more losses to come.
Hong Kong stocks managed to hold on to gains despite the downdraft from mainland markets, with the Hang Seng index ending 0.5 percent higher at 18 813.4 points, and the China Enterprises index of top mainland listings in Hong Kong gaining 0.5 percent.
But traders said weak turnover in Hong Kong pointed to a lack of confidence and signalled that the day’s gains might not be sustained.
In Shanghai, investors unwound positions in growthsensitive sectors and small cap names after the HSBC China services purchasing managers index for December showed sluggish growth.
The Shanghai composite index reversed early gains to slip for a second session, closing down 1 percent at 2 148.5 points. The Shanghai materials sub-index declined 2.4 percent.
Insurance firms and brokerages, seen as proxys of the A-share markets due to their extensive exposure, were among the top drags. China Life Insurance shed 5 percent, while Citic Securities lost 2.8 percent.
“Today’s move clearly shows we haven’t seen the bottom in the mainland. Economic data this quarter could get quite ugly, so further weakness, particularly in the smaller caps, is likely,” said a a manager of a Qualified Foreign Institutional Investor fund, declining to be identified as he was not authorised to speak to the media.
The CSI500, a gauge of small- and medium-cap names listed on the Shanghai and Shenzhen bourses, slumped 3.7 percent. Zhejiang China Light and Textile Industry City Group tumbled the maximum 10 percent.
Chinese banks bucked broader weakness after Shanghai Pudong Development Bank on Wednesday reported a 42 percent increase in net profit for last year.
The earnings report pushed Pudong’s shares up nearly 3 percent and prompted investors to buy into the broader sector, taking the numbers as a sign that concerns over mounting bad debts may have been overblown.
“It’s possible some funds have bought into banks. Valuations are already very low to begin with, so any signs that show fears are overblown will bring investors back into the market,” Xiangcai Securities analyst Chen Yi said.
In Hong Kong, continued strength in oil stocks helped support broader gains, but weak turnover and strength in defensives pointed to caution on renewed euro zone fears in global markets.
“It’s fair to say most are expecting the macro picture to worsen further before getting better. Flows won’t start increasing unless we get more clarity, particularly from China,” said Benjamin Chang, of LBN Advisors.
Higher oil prices, spurred by fears of disruptions from Iran, boosted Chinese oil majors. CNOOC rose 2.8 percent, while Petrochina and China Petroleum & Chemical gained 1.6 and 2.3 percent, respectively. – Reuters