Chinese shares sink in rout to worst single day loss in a month as new listings, tighter regulation deflates market
Onshore Chinese yuan tumbles to fresh 4-1/2 year low; trading in Hong Kong share market very light
Panic selling swept through Chinese markets on Monday with Shanghai A-shares suffering its largest single day loss in a month while B-shares slid by 8 per cent in the last trading week of 2015.
Brokers blamed a combination of reasons behind the pounding endured by the markets ranging from the expected flood of new listings next month, a tightening of regulations in forex trading related to B-shares used by foreign investors and Chinese with forex holdings, and the poor economic data which prompted punters to dump stocks ahead of the New Year holiday this Friday. All markets in China and Hong Kong are shut for New Year, reopening for business on January 4.
The Shanghai Composite Index dropped 2.6 per cent, or 94.13 points, to close at 3,533.78, while the CSI 300 which tracks large caps in Shanghai and Shenzhen also declined 2.88 per cent, or 110.57 points, to end at 3,727.63.
The Shenzhen Composite Index lost 2.18 per cent to finish at 2,308.38.
In Hong Kong, the Hang Seng Index was down 0.99 per cent at 21,919.62 while the Hang Seng China Enterprises Index, also called the H-shares index which track Chinese enterprises listed in Hong Kong, slumped 1.65 per cent to 9,789.46.
The biggest fall came in the Shanghai B-shares Index which settled 8 per cent weaker to close at 407 in the afternoon, after hitting a six month high in the morning. The index had risen 70 per cent in the past three months. The Shenzhen B-shares Index also fell 4.9 per cent on Monday to close at 1,280.
“The B-shares market has risen substantially over the past three months and the speculation on the new policy led to a panic selling, which dragged down A-share markets in Shanghai and Shenzhen as well as the H-shares in Hong Kong,” said Louis Tse Ming-kwong, director of VC Brokerage.
“Mainland investors are selling shares to prepare funding the upcoming 28 initial public offerings in the mainland in January. The many IPOs would dry up liquidity in the secondary market,” he said.
Beijing on Sunday passed a bill that will transfer responsibility for vetting initial public offerings to stock exchanges in Shanghai and Shenzhen, taking the responsibility away from the China Securities and Regulatory Commission. For more on this story: read here.
Analysts said the rule change will likely make it easier for companies to go public and to bring more IPOs in the coming months.
Separately, the yuan dropped to a 4-1/2 low with the onshore yuan trading 0.19 per cent down at 6.4870 to the dollar, which is the lowest level since May 27, 2011 when it traded at 6.4910.
The offshore yuan also tumbled to a 4-year low at 6.5531 to the greenback.
Data released ahead of the market open showed profits at Chinese industrial companies eased 1.4 per cent in November, the sixth consecutive month it has declined.
In Hong Kong, shares of Chinese Estate Holdings surged 3.18 per cent to close at HK$26, after the company announced they would sell their Windsor House commercial building in Causeway Bay. For more: read here.
Total market turnover in Hong Kong hit a fresh low at HK$41.52 billion compared with the average daily turnover of HK$109.9 billion in the first 11 months of this year.
KGI Asia executive director Ben Kwong Man-bun said investors were shying away during a short trading week. “Investors are probably preferring to stay on the sideline and then, after the holiday, in 2016, they’ll refocus their strategy,” Kwong said.