China Markets Live - China stocks reverse course and rally into close; Hong Kong tempers losses

Shenzhen stocks jump after companies pledge not to sell shares; Chinese regulators step up efforts to support stock markets

PUBLISHED : Thursday, 14 January, 2016, 9:23am
UPDATED : Saturday, 16 January, 2016, 2:02pm

Welcome to the SCMP’s live China markets. The intense volatility in Chinese markets into 2016 due to the implementation of the circuit breaker has roiled world financial markets. Investors are increasingly focused on the broader question of how this episode might affect the wider economy of the country. We’ll bring you the key levels, trading statements, price action and other developments as they happen.

Here is a summary of market action so far today:

  • Shanghai benchmark climbs 2 per cent to close above 3,000, recovering all the losses
  • Shenzhen Composite jumps 3.8 per cent after companies on startup board pledge not to sell shares in at least six months
  • Hong Kong's Hang Seng Index finishes 0.6 per cent lower, paring an earlier decline

 

5:40 pm By Laura He

Major Asia stock markets mostly pulled back on Thursday, tracking steep declines on Wall Street overnight. Japan's Nikkei Average retreated 2.7 per cent to 17,240.95, the lowest close in more than three months. The index advanced 2.9 per cent on Wednesday. Australia's S&P/ASX 200 gave up 1.6 per cent to end at 4,909.40, and South Korea's Kospi Composite Index settled 0.9 per cent lower at 1,900.01. India's Sensex moved down 0.4 per cent to 24,764.35 in afternoon trade.

Meantime, oil prices picked up in Asian trade Thursday, as the WTI crude futures gained 0.8 per cent to US$30.69 a barrel. The Brent futures traded flat at US$30.30 a barrel, after briefly touching a low of US$29.73. Overnight, WTI closed higher for the first time in eight sessions in New York, while Brent fell further in London.

 

4:05 pm By Jessie Lau

Hong Kong’s Hang Seng Index closed at 19,817.41, down 0.59 per cent or 117.47 points. The H-shares index finished at 8,460.53, down 0.40 per cent or 33.96 points.

Below is the one-day chart of Hong Kong’s major stock indexes. Hang Seng Index (yellow), H-share index (purple). Click to enlarge the chart.

4 pm By Laura He

More than 20 listed companies in China’s startup board issued separate statements Thursday noon that their major shareholders won’t sell stocks in at least six months, including Shenzhen-based automaker BYD.

Shenzhen stock markets popped higher in afternoon trade, with the ChiNext Index reversing sharp early losses and closing up 5.6 per cent.

BYD jumped 4.4 per cent to close at 59.9 yuan in Shenzhen. Its Hong Kong-listed shares climbed 2.2 per cent to HK$37.6.

Chinese regulators have stepped up efforts to bolster the country’s stock markets through more “secretive and unofficial” ways, media reports said.

Those tactics included photo calls made by stock exchange officials to major shareholders, prompting them not to sell their stakes, and stock purchases by state-backed investment funds, the Wall Street Journal quoted unnamed corporate executives as saying in a Wednesday report.

Shanghai and Shenzhen stock exchanges announced late Wednesday that they will “strictly monitor” the selling of stocks by major shareholders in Chinese markets.

3:00 pm By Jessie Lau

The Shanghai Composite Index closed at 3,007.65, up 1.97 per cent or 58.05 points. The CSI300 gained 2.08 per cent or 65.69 points to 3,221.57.

The Shenzhen Composite Index closed at 1,859.37, up 68.19 points or 3.81 per cent. The ChiNext also closed higher by 5.59 per cent or 115.24 points to 2,175.01.

Below is the one-day chart for Chinese stock markets: Shanghai Composite Index (orange), Shenzhen Composite Index (green), CS1300 Index (purple) and ChiNext (blue). The percentage at the end of the chart represents the difference from the opening, not from the previous close. Click to enlarge chart.

3:11 pm By Jessie Lau

Smaller Chinese life insurers are more vulnerable to the sharp declines in China’s stock markets, as they generally have more aggressive risk appetites and are more reliant on the selling of insurance products, Fitch Ratings said in a recent report.

Those smaller industry players are often pursuing higher investment returns to garner more attractive rates. Meantime, they are concentrating on low-margin savings-type products with short durations, thus become more exposed to equities than larger insurers, analysts said.

“The short durations of their insurance liabilities might lead them to dispose of some of their investments at unfavourable prices,” the rating agency said.

2:59 pm By Enoch Yiu

Below is a chart that shows a dramatic fall in Chinese stocks since the start of this year. Click to enlarge the chart.

The Shanghai Composite Index (orange) has plunged 17.57 per cent during the period, and the CSI300 (purple) has dropped 15.93 per cent. The Shenzhen Composite Index (green) was down 22.64 per cent, and the ChiNext (blue) dived 23.21 per cent.

2:25 pm By Jessie Lau

Hong Kong’s Hang Seng Index dropped 0.57 per cent or 112.78 points to 19,822.10. The H-share index lost 0.42 per cent or 35.36 points at 8,459.13.

The Shanghai Composite Index traded at 2,983.13, up 1.14 per cent or 33.53 points, and the CSI300 index was at 3,198.75, up 1.36 per cent or 42.87 points.

The Shenzhen Composite Index was at 1,839.38, up 2.69 per cent or 48.20 points. The Nasdaq-style ChiNext Price Index jumped 4.72 per cent or 97.17 points to 2,156.95.

1:10 pm By Jessie Lau

Hong Kong’s Hang Seng Index opened the afternoon session at 19,632.80, down 1.52 per cent or 302.08 points. The H-share index opened at 8,354.39, down 1.65 per cent or 140.10 points.

Over on the mainland, the Shanghai Composite Index also opened lower in the afternoon, down 0.71 per cent or 20.90 points at 2,928.64. The CSI300 index was at 3,146.15, down 0.31 per cent or 9.73 points.

The Shenzhen Composite inched up 0.08 per cent, or 1.35 points, to 1,792.53. The Nasdaq-style ChiNext Price Index gained 1.89 per cent or 38.99 points to 2,098.77.

12:20 am By Benjamin Robertson

Hong Kong stocks finished the morning session lower, as the Hang Seng index fell 1.63 per cent, or 325.92 points, to 19,608.96. The H-share index closed down 1.92 per cent, or 163.08 points, at 8,331.41.

11:39 am By Benjamin Robertson

Chinese markets recovered some of their losses at the end of the morning session, with the Shanghai Composite closing down 1.11 per cent, or 32.64 points at 2,916.96. The CSI 300 index lost 0.63 per cent, 19.80 points, to finish at 3,136.08.

The Shenzhen Composite index posted modest losses, down 0.28 per cent, 5.04 points, at 1,786.1, while the ChiNext index reversed course and bounced back 1.18 per cent, or 24.32 points, to close at 2,084.09.

11:20 am By Benjamin Robertson

A recent spike in the Hong Kong interbank rate for offshore yuan (CNH) to more than 200 per cent does not mean there will be broader liquidity problem in the Hong Kong banking system, though it is too early to say what the impact on bank earnings will be, said Fitch Ratings.

It said:

“(The CNH market) is still relatively small and there is only a limited risk of the rate spike having a significant direct impact on Hong Kong banks. The market is driven by deposits and banks’ issuance of certificates of deposits, both of which are likely to decline if the unit depreciates. Banks in turn hold their CNH in cash equivalents and securities and trade derivatives. The share of CNH lending, mostly trade related, has remained small as indicated by a loan-to-deposit ratio of below 30 per cent. There are large market-making banks with big pools of CNH - including the major mainland lenders, HSBC, Standard Chartered, BNP Paribas and Citi - and Fitch believes they will continue to make it available to their clients.”

“The impact on earnings for Hong Kong banks is difficult to assess, while it is unlikely to result in higher impairment charges - and some banks may even benefit in the form of increased interest and trading revenues. ”

“Nonetheless, the volatility seen in CNH-Hibor and the PBOC’s intervention could raise questions regarding the credibility and sustainability of the yuan’s internationalisation more generally, and highlights the opaqueness of the CNH market and cross-border flows. As such, this could affect investor sentiment, especially at a time of increased capital market volatility and broader concerns regarding macroeconomic risk.”

“The PBOC’s intervention is likely to support the CNH and act as a stabilising factor to slow the rate of depreciation versus the US dollar and Hong Kong dollar, although banks’ usage of yuan is likely to continue to focus on securities and bank placements. More profitable yuan lending is still likely to grow only slowly, in line with the broader direction of the currency.”

11:15 am By Benjamin Robertson

Markets across Asia were a sea of red Thursday morning, with Japan’s Nikkei 225 index the worst hit among major stock indexes. The Nikkei retreated 3.66 per cent to 17,068.08, giving up four months of gains. Australia’s S&P/ASX 200 index was down 1.54 per cent at 4,910.40. Singapore’s Straits Times index was 1.54 per cent lower at 2,655.

11:13 am By Jessie Lau

In Hong Kong markets, support services, conglomerates, and oil and gas companies were among the industries leading the losses, shedding about 2 per cent on average. The leading decliner in support services is Sino-life Group, diving 10.19 per cent to HK$0.14, while conglomerate Styland Holdings sank 7.69 per cent to HK$0.36.

Among stocks with highest turnover, , Sinopec lost 4.22 per cent to HK$4.09, AIA Group fell 2.09 per cent to HK$42.2, Cnooc shed 2.89 per cent to HK$7.06, China Life Insurance dropped 2.59 per cent to HK$20.65, and Tracker Fund of Hong Kong was down 2.08 per cent to HK$19.78.

Property developer Shanghai Zendai fell further in late morning trade, losing 16.88 per cent to HK$0.192, and private-equity investment firm CIAM Group skidded 15.39 per cent to HK$1.1.

11:00 am By Benjamin Robertson

The Shanghai Composite Index was down 1.94 per cent or 57.14 points to 2,892.46, and the large-cap CSI300 index was off 1.4 per cent or 44.19 points at 3,111.69.

The Shenzhen Composite Index dropped 1.12 per cent, or 20.07 points, to 1,771.11.

However, the Nasdaq-style ChiNext Index crawled back and rose 0.1 per cent or 1.93 points to 2,061.71.

11:00 am By Benjamin Robertson

Hong Kong’s Hang Seng Index declined 1.63 per cent, or 324.76 points to 19,610.12. The H-shares index lost 1.8 per cent, or 150.95 points, at 8,343.54.

10:43 am By Benjamin Robertson

Global default risk may climb this year as result of widening spreads, sustained stress in commodity sectors, and the economic slowdown in China, among other factors, Moody’s Investor Services predicted.

The global speculative-grade default rate doubled in the fourth quarter 2015 on a year-on-year basis, led by a raft of failures in the struggling energy and mining sector, the rating agency said in a Thursday research note.

“Of the 35 defaults in the fourth quarter, more than half were distressed exchanges; the rest were bankruptcies (26 per cent) and payment defaults (20 per cent). Region wide, nearly half of the defaults were in North America while 26 per cent of defaults were in Europe. With the number of defaults rising in the fourth quarter, the issuer-weighted trailing 12-month global speculative grade default rate finished at 3.4 per cent in the fourth quarter, up from 2.6 per cent in the prior quarter. For the US, the comparable rate rose to 3.2 per cent from 2.7 per cent and to 3.4 per cent from 2.2 per cent for Europe,” analysts from Moody’s said.

Oil, gas, metals and mining sectors are expected to dominate corporate defaults this year, followed by the hotel, gaming and leisure industry, they added.

10:37 am By Jessie Lau

In Hong Kong markets, insurance, semiconductors, conglomerates, and oil and gas companies were among the industries leading the losses, shedding about 2 per cent on average.

Among stocks with highest turnover, Chinese refiner Sinopec sank 4.68 per cent to HK$4.07, offshore oil producer Cnooc slid 3.58 per cent to HK$7.01, life insurer China Life Insurance lost 2.59 per cent to HK$20.65, and property developer China Vanke fell 2.31 per cent to HK$17.76.

10:33 am By Benjamin Robertson

Chinese trade data, which were released Wednesday, may not be all it seems, wrote analysts at Rabobank.

They said:

“Firstly, the data were at odds with what Taiwan and Korea reported, (where) exports were down 13.9 per cent and 13.8 per cent year-on-year, respectively. That is already suspicious. Moreover, underneath the headline something rather strange was happening. For example, imports from Hong Kong were up 64.5 per cent year-on-year, while exports to Hong Kong were up 10.8 per cent. Exports to Japan were also up 6 percentage points, albeit still negative year-on-year, even as consumer spending is not and as machine orders out this morning plunged 14.4 per cent month-on-month in November, and shipments to the EU surged from negative 9.5 per cent to positive 1.7 per cent. All in all, it looks like we are seeing over-invoicing by importers, to get capital out, while exporters are also finding creative ways to invoice in order to circumvent capital controls.”

10:24 am By Enoch Yiu

Chinese authorities may have spent too much efforts intervening in the yuan markets, said Singaporean banking firm DBS in a recent research report.

DBS said:

“Mainly in an effort to display ‘leadership’ in the run-up to the Special Drawing Rights (SDR) decision, the RMB ran with the dollar, on almost a one-to-one basis. By autumn-2015, that left it some 12 per cent stronger against the tri-currency basket than it should have been.

Now China wants to go home again and it can’t. After the RMB was included in the SDR, authorities announced they would pursue the basket strategy they should have pursued all along. Markets interpreted the divorce with the dollar an official wish for a weaker currency and wasted no time in granting it.

All of which forced the authorities, who spent US$341 billion between July 14 and Aug 15 pushing the RMB north, to spend almost that much again (US$321 billion) trying to prevent it from falling too rapidly back to earth.

In all, the authorities have spent US$661billion – 6.4 per cent of 2014 GDP – pushing and pulling the RMB this way and that. It could have spent that money restructuring a few banks or steel mills or state governments instead.”

10:18 am By Enoch Yiu

The offshore yuan traded at 6.5951 as of 10 am, weaker by 0.46 per cent from Wednesday, after the PBOC stopped its intervention in the offshore market on Wednesday.

Meantime, the onshore yuan was at 6.5843, down 0.16 per cent from Wednesday.

The offshore yuan traded at a discount of 108 basis points to the onshore yuan, compared with a premium of about 20 basis points on Wednesday. The spread once touched a record high of 1,400 basis points last Thursday.

10:14 am By Enoch Yiu

The People’s Bank of China (PBOC) set the yuan’s midprice fixing against the US dollar stronger by 14 basis points to 6.5616. The Chinese central bank had guided the yuan lower for the past two days.

Meantime, the PBOC set the midprice for the euro against the onshore yuan weaker by 257 basis point to 7.1468, while the yuan’s reference rate against every 100 yen was at 5.5857, weaker by 84 basis point. The British pound’s midprice was stronger by 337 basis point to 9.4609.

Traders are allowed to trade two per cent basis point each directions of the mid price for the day set by PBOC.

10:12 am By Benjamin Robertson

Hong Kong’s Hang Seng index was still down 1.65 per cent, or 329.05 points, at 19,605.83. The H-shares index was weaker by 1.74 per cent, or 147.94 points, at 8,346.55.

10:10 am By Benjamin Robertson

Chinese stocks recouped some opening losses, with the Shanghai Composite Index down 0.84 per cent or 24.69 points to 2,924.91. The large-cap CSI300 index was off 0.48 per cent or 15.13 points to 3,140.75.

The Shenzhen Composite Index lost 0.47 per cent or 8.45 points to 1,782.73. The Nasdaq-style ChiNext Index was 0.62 per cent lower, or down 12.83 points, to 2,072.61.

10:05 am By Benjamin Robertson

China’s recently-released trade data for December showed the country’s authorities are “on the horns of a trilemma” when it comes to managing the country’s foreign exchange reserves, wrote analysts at ING.

“(The data) put the full-year trade surplus at a record US$595 billion, and underscored that hot money outflows drove the US$513 billion drop in foreign exchange reserves last year. The People’s Bank of China evidently intervened heavily to curb CNY (onshore yuan) depreciation pressure,” analysts from the Dutch banking firm said.

“They’re only US$330 billion away from US$3 trillion of foreign exchange reserves, which we believe is a line in the sand. They don’t want a maxi CNY devaluation and they want lower interest rates to support growth,” they added.

The solution may lie in “command and control policies”, whereby the PBOC continue to limit the currency trading operations at licensed banks.

“Economic reform frequently is a two steps forward, one step back process. Capital account opening took two steps forward in the first three years of the Xi administration. We think 2016 will be a year of one step back,” ING noted.

9:39 am By Laura He

Chinese stocks also opened lower Thursday, following steep losses in the previous session. The Shanghai Composite Index dropped 2.6 per cent or 75.55 points to 2,874.05. The large-cap CSI300 index fell 1.1 per cent or 34.83 points to 3,121.05.

The Shenzhen Composite Index traded down 1.6 per cent or 28.56 points to 1,762.62. The Nasdaq-style ChiNext Index was off 1.2 per cent, or 25.21 points, to 2,034.56.

On Wednesday, the Shanghai Composite Index declined 2.42 per cent to close at 2,949.60, the lowest settlement since August, and the Shenzhen Composite Index slid 3.46 per cent to 1,791.18, the worst closing level in three months.

Read Wednesday’s China Markets Live here on scmp.com.

9:37 am By Laura He

Hong Kong stocks tumbled at open Thursday. The Hang Seng Index moved down 2 per cent or 404.61 points to 19,530.27 in early trade. The Hang Seng China Enterprises index, or the H-share index, dropped 2.44 per cent or 206.88 points to 8,287.61.

The Hang Seng benchmark closed Wednesday up 1.1 per cent or 223.12 points at 19,934.88. The H-shares index rose 0.65 per cent or 55.18 points to 8,494.49.

9:18 am By Benjamin Robertson

Hong Kong stocks were expected to open sharply lower Thursday, as the Hang Seng Index futures spot January contract declined 2.2 per cent or 438 points to 19,621. H-share index futures slid 3.3 per cent or 280 points to 8,315.

Overnight on Wall Street, the Dow Jones index dropped 2.2 per cent or 365 points to 16,151.41. The S&P 500 index shed 2.50 per cent to 1,890.28, with both indices returning to levels last hit in September. The Nasdaq index also fell sharply, dropping 3.41 per cent to 4,526.06.

Read an expanded version of the story here on scmp.com.

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