CHINA MARKETS
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China Stock Turmoil 2015

China stocks post first monthly gain since June

PUBLISHED : Friday, 30 October, 2015, 9:13am
UPDATED : Friday, 30 October, 2015, 8:18pm

Chinese stocks on Friday scored their first monthly gain in five months, but still finished the week lower on a weak batch of corporate earnings. However, investors rushed to snap up baby-related stocks after China ditched its one-child policy to allow all couples to have two children for the first time in 35 years.

Shanghai stocks nudged lower in seesaw trade, as the benchmark Shanghai Composite Index closed down 0.1 per cent to 3,382.56.

The index settled 0.9 per cent lower for the week, but still capped the month with a solid 11 per cent gain, its first monthly advance since June.

Meanwhile, the large-cap CSI300 index ended flat at 3,534.08. In Shenzhen, the Shenzhen Composite Index was also unchanged at 2,014.86, with the ChiNext Index down 0.3 per cent at 2,478.28.

Hong Kong stocks declined, dragged lower by Chinese banks and oil firms on poor corporate earnings. The Hang Seng Index fell 0.8 per cent to 22,640.04, with the Hang Seng China Enterprises index down 0.4 per cent to 10,396.58.

Baby-related stocks surged in both Hong Kong and mainland markets.

“China’s decision to replace the 35-year-old one-child policy with a two-child policy prompted investors to snap up any shares relating to babies – from diapers and body-care products to baby food and infant milk formula,” said Bernard Aw, an analyst for IG Group.

However, he cautioned that the current rush for baby-related stocks may not “necessarily bear fruit”, as the timeline is not revealed yet, while it’s also not clear how many new births the policy change may prompt.

Among index components in Hong Kong, dairy product producer China Mengniu climbed 3.4 per cent to HK$15.06, making it the top performer among blue-chip stocks, and diaper manufacturer Hengan International snagged a 2 per cent gain.

In mainland China, a number of baby-related stocks hit the daily upside limit of 10 per cent, including Beingmate Baby & Child Food, milk product maker Xinjiang Western Animal Husbandry, and infant clothes maker Jinfa Labi Maternity & Baby Articles.

However, a disappointing batch of corporate results sent oil and financial stocks lower in both Hong Kong and mainland markets. PetroChina, the country’s largest oil and gas producer, fell 2.1 per cent to HK$6.06 in Hong Kong and 0.8 per cent to 8.75 yuan in Shanghai. The company posted a surprise loss of 5.2 billion yuan in the third quarter, down 81 per cent from the same period a year ago, falling far below market expectations. It also issued a profit warning for the entire year.

Refining giant Sinopec also dropped 1.2 per cent to HK$5.55 in Hong Kong after its net income retreated 92 per cent year on year in the third quarter, also missing forecasts by a wide margin. Its Shanghai-listed stock lost 0.8 per cent to 5.03 yuan.

Bank of China fell 1.3 per cent to HK$3.67 in Hong Kong, after it recorded a 1.5 per cent decline in profit for the past quarter, falling short of estimates. China Construction Bank shed 0.9 per cent to HK$5.63, as its third-quarter net income increased by less than 0.1 per cent.

China Huarong Asset Management, which led the biggest initial public offering deal in Hong Kong this year by far, is closing almost flat on its debut in Hong Kong at HK$3.10, compared with its IPO price of HK$3.09.

With additional reporting from Xie Yu