China Stock Turmoil 2015

Hong Kong stocks end lower, mainland China markets mostly flat as CPI data tilts towards deflation

Balance of margin financing in Shanghai saw the biggest daily jump of 3.3 per cent on Monday

PUBLISHED : Tuesday, 10 November, 2015, 9:04am
UPDATED : Tuesday, 10 November, 2015, 9:44pm

After several days of muted gains mainland and Hong Kong markets paused for breath Tuesday as benchmark indices closed lower on profit taking and weaker-than-expected inflation data.

Among the biggest gainers in recent sessions, mainland banks and property developers retreated, weighing down markets on both sides of the border.

Industrial and Commercial Bank of China fell 1.5 per cent to 4.73 yuan and Agricultural Bank of China dropped 1.2 per cent to 3.29 yuan. Infrastructure giant China Communications Construction gave up 2.2 per cent to finish at 16.21 yuan.

Concerns over the China growth outlook were back in focus as monthly inflation data released ahead of the market open showed consumer prices tipping towards deflation, while producer prices remained mired in negative territory for the 44th straight month.

The October consumer price index (CPI) rose 1.3 per cent from a year earlier, compared with 1.6 per cent in September, National Bureau of Statistics (NBS) data showed on Tuesday. The producer price index (PPI) fell 5.9 per cent in October from a year earlier, equal to the 5.9 per cent decline in September.

During the weekend, China’s General Administration of Customs said October exports fell 6.9 per cent year-over-year in dollar terms, after a drop of 3.7 per cent in September. Imports in October fell by a sharper-than-expected 18.8 per cent from a year earlier, following a 20.4 per cent decline in September.

“Domestic demand is pretty weak. People are willing to spend but the corporate side is weak, especially iron ore, steel and oil sectors,” said Ivan Li, equities analyst at Tung Shing Securities.

Citing the challenges in rebalancing the Chinese economy towards consumption and services the Organisation for Economic Cooperation and Development forecasts China’s annual growth will ease to 6.2 per cent by 2017, slightly below official Chinese estimates of 6.5 per cent.

Mainland markets recovered from morning losses to close little changed for the day. The Shanghai Composite Index finished 0.2 per cent lower at 3,640.49, while the Shanghai Shenzhen CSI 300 large cap index was down 0.2 per cent at 3,833.24. The Shenzhen Composite performed better, rising 0.8 per cent at 2,209.60, on news Chinese regulators had met to discuss cross border trading between Shenzhen and Hong Kong bourses.

Any trading platform would include Shenzhen’s NASDAQ style ChiNext board, and tests are currently being run on the link infrastructure, Liu Fuzhong an official at Shenzhen’s stock exchange, was quoted as saying by Bloomberg.

Hong Kong’s Hang Seng Index fell in the afternoon, closing down 1.4 per cent at 22,401.70. The China Enterprises Index of H-shares dropped 1.8 per cent to 10,314.74.

Shares of CK Infrastructure ended 2.4 per cent lower at HK$68.55 and Power Assets eased 1.4 per cent to HK$73.85. The declines follow a report by Institutional Shareholder Services on Monday in the US which urged investors to reject a buyout proposal from Cheung Kong Infrastructure Holdings. The advisers said minority shareholders in Power Asset Holding shouldn’t agree to the buyout unless the exchange for CKI shares is raised to a ratio of 1.09 to 1.2, up from the current offer of 1.066, according Bloomberg.

Shares in Chinese investment bank CICC jumped again Tuesday, having risen more than 12 per cent since their debut Monday, with the stock closing 4.9 per cent higher Tuesday at HK$11.58.

Macau casino shares fell after analysts at Deutsche, HSBC and Wells Fargo lowered their in-house November earnings forecast for the sector. Wynn Macau fell 4.75 per cent to HK$10.82 and Sands China dropped 3.50 per cent to HK$27.55. Stanley Ho family SJM Holdings was off 2.51 per cent at HK$6.22. Melco International Development tumbled 7.3 per cent to HK$11.72.