China Stock Turmoil 2015

Hong Kong, China stocks end down slightly on IPO resumption concerns, brokerages weaker

The Hang Seng Index finished down 0.4 per cent and the Shanghai Composite Index eased 0.6 per cent

PUBLISHED : Monday, 23 November, 2015, 9:08am
UPDATED : Monday, 23 November, 2015, 7:23pm

Chinese stocks ended lower on Monday, weighed down by concerns that the restart of share listings this week may divert some funds away from the markets, while Guotai Junan led financial companies lower after the brokerage said it has not been able to contact its chairman Yim Fung since November 18.

Hong Kong’s Hang Seng Index finished down 0.4 per cent at 22,665.90, while the China Enterprises Index was off 0.7 per cent to 10,229.43.

On the mainland, the Shanghai Composite Index dropped 0.6 per cent to 3,610.32, and the large-cap CSI300 fell 0.6 per cent to 3,753.34. The Shenzhen Composite Index fell 0.8 per cent to 2,268.62, and the ChiNext Index shed 1.1 per cent to 2,770.58.

Turnover in Hong Kong totalled HK$63 billion, slightly down from Friday’s HK$64 billion. In Shanghai 414 billion yuan worth of shares changed hands, compared with 415 billion yuan in the prior session.

A batch of 10 Chinese companies approved to proceed with initial public offerings issued their preliminary prospectuses on Monday, the first since a four-month suspension was implement in June in an effort to calm unsteady markets.

The batch of 10 companies are expected to “lock in” around 1 trillion yuan, Larry Hu and Jerry Peng, analysts for Macquarie Securities, said in a note on Monday.

The resumption of IPOs may “divert funds from the A-share secondary market”, said Xie Jinchao, an analyst for Luk Fook Securities. He added that historical data since last year showed mainland stocks often experienced “significant volatility” before or after new shares’ subscriptions.

China’s top securities regulator announced earlier this month it would lift a four-month suspension on IPO activities in Shanghai and Shenzhen.

Hong Kong-listed Guotai Junan International announced this morning it had been unable to reach its chairman and chief executive Yim Fung since last week. The firm didn’t provide details on the circumstances of his disappearance.

China’s sweeping anti-corruption probe has hit the financial sector, with a string of financial regulators, company executives, and hedge fund managers under investigation.

Guotai Junan International tumbled 12 per cent to HK$2.85 in Hong Kong while Guotai Junan Securities, the mainland-based parent company of Guotai Junan International, fell 2.6 per cent to 23.96 yuan in Shanghai.

Among other brokerages, Founder Securities fell 3.5 per cent to 10 yuan in Shanghai, Citic Securities dropped 2.1 per cent to 20.09 yuan, and Haitong Securities gave up 1.3 per cent to 16.56 yuan.

In Hong Kong, Haitong Securities lost 4 per cent to HK$14.36, and Citic Securities was off 1.9 per cent to HK18.84.

“The market overall is weak and lacks reason to have a more exciting run,” said Louis Tse Ming-kwong, director at VC Brokerage. “Turnover remains at the low end, and investors are still figuring out the direction going forward.”

However, several tech stocks listed in Shanghai bucked the market trend and recorded gains, after the Shanghai Equity Exchange, an over-the-counter equity marketplace in Shanghai, said on Monday that it had received the green light to launch a technology innovation board in Shanghai for start-ups, according to a Reuters report.

Luxin Venture Capital Group surged 5.9 per cent to 40.1 yuan, Shanghai Shibei Hi-Tech rose 1.1 per cent to 23.28 yuan, and Nanjing Gaoke moved up 0.7 per cent to 20.14 yuan.

In the currency markets, both onshore and offshore yuan had a bullish session Monday. The onshore yuan closed at 6.3895 against per US dollar. The offshore yuan at one point touched 6.4352, and was trading around 6.42 throughout most of the day. The spread between onshore and offshore yuan widened to over 400 basis points, the biggest gap in a month. A large spread is viewed as having an adverse impact on the currency’s potential weighting in the Special Drawing Rights, the inclusion of which is being reviewed by the International Monetary Fund.