China markets claw back losses as materials sector leads recovery
Weak China trade numbers prove a drag on opening sentiment but market recovers quickly with A-share stocks finishing almost flat
Deep lows and near misses characterised the first trading day of the Year of the Monkey for mainland Chinese markets, as A-share stocks clawed back to almost finish flat.
Just after open Shanghai and Shenzhen were down 2.84 and 3.25 per cent, respectively, but by the close of trading both had almost regained all their lost value.
The Shenzhen Composite Index closed down just 0.04 per cent, finishing at 1,750.02, after briefly trading in positive territory during the afternoon.
In Shanghai, markets ended slightly down at 2746.20, 0.63 per cent lower compared to their pre-Lunar New Year values, while the blue-chip China Securities Index followed suit by closing at 2,946.71, down 0.58 per cent.
Ample Capital Asset Management director Alex Wong said a weak set of China trade data had damaged opening sentiment but it recovered quickly.
“They shook it off probably because I think the renminbi will stabilise now the easing US dollar has softened the depreciation pressure on the [Chinese currency],” he said.
China’s January exports were down 6.6 per cent year-on-year, according to customs administration data released on Monday, while imports were down 14.4 per cent.
Wong said comments made by People’s Bank of China governor Zhou Xiaochuan in an interview with Caixin helped keep market sentiment positive as well. “The Chinese government will do whatever it needs to do to stabilise the renminbi,” Wong said.
A strong showing in China’s commodity sector was partly responsible for the rally, as heavily-traded stocks saw double digit gains at the close of business.
Shandong Gold Mining rose by 10.02 per cent on Monday to close at 22.73 yuan (HK$27) a share, while Zijin Mining Group saw gains of 9.93 per cent to 3.32 yuan.
Wong said gains in the sector had been due to strengthening oil prices and positive movement in commodity prices worldwide.
“A recovery in commodity prices will help this sector a lot,” he said. “They have been down a lot over the past two months.”
Oil prices improved marginally at the end of last week, but US crude lingers under the US$30 mark with Brent crude just a few dollars ahead as mounting stockpiles stoke fears of a storage crunch adding to the industry’s woes.
The positive movement in the materials sector was offset by a negative trend among financial and industrials stocks in Shanghai, as well as Shenzhen.
A large gap between A and H-shares opened up on Monday, as the Hong Kong market surged to close up 3.27 per cent to 18,918.14, while the China Enterprises index rose even faster by 4.78 per cent, finishing the day at 7,863.84.
Wong said local mainland sentiment towards China’s economic prospects was much more positive compared to overseas investors.
“I think we may see the A-share indexes remain okay but H-shares may not have much room to rebound after today,” he said.
HSBC Holdings outperformed the market, lifting 4.57 per cent to HK$50.30, with investors apparently welcoming the bank’s decision not to relocate its headquarters from London to Hong Kong.
HSBC shares closed last week at HK$48.10, their lowest since November 2011, which VC Brokerage director Louis Tse said reflected a feeling among investors that the “golden era” was over.
“Not long from now there could be a change in top management,” he said. “With the domicile remaining in the UK they don’t need this bunch of people to take care of the transition.”
In addition, both Japanese and Korean markets performed well on Monday, in a strong day for the region, with the Nikkei index closing up 7.16 per cent to 16,022.58.
In Korea, the KOSPI closed up a more modest 1.47 per cent to 1,862.20.