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China stocks cautiously higher as yuan hits six-year low; Hong Kong market closed amid typhoon

Yuan weaker as PBOC slashes fixing while HKEX cancels trading due to strong storm

PUBLISHED : Friday, 21 October, 2016, 8:42am
UPDATED : Friday, 21 October, 2016, 10:39pm

Chinese stocks edged higher on Friday to close the week with modest gains, while analysts said investors have turned cautious amid the yuan’s continued depreciation.

Meantime, Hong Kong’s stock market was closed due to a typhoon – the second time this year bad weather has forced a halt to trading.

The Shanghai Composite Index opened lower and bounced between small gains and losses for the day, before closing up 0.2 per cent or 6.48 points at 3,090.94. For the week, the benchmark gained 0.9 per cent, adding to a 2 per cent rally in the previous week.

The large-cap CSI 300 Index rose 0.3 per cent or 9.14 points to 3,327.74.

However, the Shenzhen Component Index dropped 0.3 per cent or 35.43 points to 10,748.9 while the Shenzhen Composite Index lost 0.4 per cent or 7.83 points to 2,052.56. The startup ChiNext Index also settled lower, off 0.6 per cent or 12.26 points to 2,181.00.

Combined turnover for Shanghai and Shenzhen markets on Friday increased to 506 billion yuan.

However, analysts were cautious about the direction of the markets.

“More investors want to move their money abroad for better value, as they suspect the yuan will decline further in the near term,” said Wei Jianfei, an analyst for Lianchu Securities.

More investors want to move their money abroad for better value, as they suspect the yuan will decline further in the near term
Wei Jianfei, Lianchu Securities analyst

Besides, the upcoming Shenzhen-Hong Kong stock connect, which is due to launch next month, has been luring mainland funds to the Hong Kong market, he added.

On Friday, the yuan hit its lowest level in six years against the US dollar in both onshore and offshore trading, after the People’s Bank of China slashed the currency’s fixing to 6.7558 per US dollar, the lowest guidance rate since September 2010. It was also the biggest cut by the central bank in almost two months.

By sector, construction and engineering shares led the way on the mainland. Power Construction soared 10 per cent to 7.05 yuan, China Communications Construction jumped 7.2 per cent to 14.36 yuan, and China Railway Construction gained 5.1 per cent to 11.03 yuan. Sany Heavy Industry advanced 3.9 per cent to 5.88 yuan.

However, coal miners were weak, with Datong Coal Industry falling 0.8 per cent to 7.14 yuan, Shaanxi Coal Industry down 0.7 per cent to 5.79 yuan, and Kailuan Energy Chemical off 0.7 per cent to 7.43 yuan.

In Hong Kong, the stock market was forced to close on Friday because of Typhoon Haima, which brought strong winds and heavy rain to the city and forced many businesses to close.

Hong Kong’s benchmark Hang Seng Index ended higher on Thursday, snagging a weekly gain of 0.6 per cent.