China Stock Turmoil 2015

China stocks halt four-day win streak amid renewed growth fears

PUBLISHED : Tuesday, 27 October, 2015, 3:46pm
UPDATED : Wednesday, 28 October, 2015, 9:00pm

Mainland Chinese stocks fell sharply on Wednesday, snapping a four-day winning streak, as fears mounted over the country’s economic slowdown after UBS slashed its forecast for China’s growth next year to 6.2 per cent from an earlier estimate of 6.5 per cent.

Hong Kong stocks also declined, with turnover shrinking to the lowest level in eight months, as investors appeared reluctant to take major bets before the upcoming results of the Federal Reserve’s policy meeting and a key meeting of Chinese leadership that concludes on Thursday.

Shanghai stocks extended early losses in afternoon trading and ended a volatile day near session lows. The benchmark Shanghai Composite Index retreated 1.7 per cent to 3,375.20. The large-cap CSI300 index lost 1.9 per cent to 3,524.92.

The Shenzhen Composite Index declined 2.2 per cent to 1,998.38 while the ChiNext Index fell 3.1 per cent to 2,485.24.

Hong Kong’s benchmark Hang Seng Index dropped 0.8 per cent to 22,956.57 and the Hang Seng China Enterprise fell 1.5 per cent to 10,558.47.

Earlier in the day, UBS cut its forecast for China’s growth, noting a sharper property slowdown has hit the industrial and mining sectors hard.

“Despite seemingly better-than-expected near-term growth, we see greater downward pressures for the economy in 2016. Property destocking has been sharper than previously envisaged, bringing with it a greater negative spillover effect on China’s industrial and mining sectors, where much excess capacity remains. External demand will unlikely offer much help. We still think another massive stimulus package will unlikely be launched or if launched be effective in reversing China’s economic slowdown,” UBS China economist Wang Tao said in note.

Both Hong Kong and mainland markets also widened losses in the afternoon session, after media reports said the Chinese securities regulator has rolled out new refinancing rules for listed companies.

Among market movers, Tsingtao Brewery, one of the country’s largest brewers, tumbled 4.6 per cent to HK$37.1, after posting a 20 per cent slide in net profit for the first three quarters. Citic Bank slipped 1.8 per cent to HK$5.04, after the company’s net income only increased 2 per cent year on year for the first three quarters, while its non-performing loans increased.

Oil stocks also suffered broadly, after crude futures fell Tuesday to a two-month low on the New York Mercantile Exchange. CNOOC shed 2 per cent to HK$8.57, Sinopec fell 1.6 per cent to HK$5.66 and PetroChina dropped 1.5 per cent to HK$6.07.

Turnover in Hong Kong declined to around HK$61 billion, the lowest level in eight months. Trading in Shanghai was also lighter, with turnover falling to 362 billion yuan from 410 billion yuan on Tuesday.

Investors have been waiting on the sidelines as they look ahead to the Fed statement due Thursday morning, as well as “fretting a likely escalation between China and US in the South China Sea”, said Louis Tse Ming-kwong, director of VC Brokerage.

In the currency market, offshore yuan (CNH) was trading at a one-month low. As of 6pm, CNH was down almost 100 basis points and trading at 6.4028 against the US dollar.

Mark Williams, chief China economist at Capital Economics, said the weakness may be owing to the PBOC stepping back from intervention.