Daily Report

Hong Kong stocks give up ground while Shanghai advances on upbeat economic data

PUBLISHED : Tuesday, 05 April, 2016, 1:03pm
UPDATED : Tuesday, 05 April, 2016, 6:26pm

Hong Kong and Shanghai stocks traded mixed on Tuesday, as mainland markets notched solid gains after an array of encouraging news, while Hong Kong stocks slipped to their lowest level in a month amid a slide in crude oil prices.

The Shanghai Composite Index shrugged off a weaker start to gain 1.45 per cent, or 43.54 points, at 3,053.07. The CSI300 Index, which tracks large companies listed in Shanghai and Shenzhen, closed up 1.32 per cent, or 42.59 points at 3,264.49.

The Shenzhen Composite Index jumped 2.61 per cent to 1,951.11 while the Nasdaq-style ChiNext edged up 3.36 per cent to 2,279.52.

The Hang Seng Index fell 1.57 per cent, or 321.92 points to 20,177 with the drop led by conglomerates and the oil and gas industry. It was the greatest intraday loss since February 25. The Hang Seng China Enterprises Index declined 1.85 per cent, or 163.82 points to 8,679.04.

Markets in Hong Kong and China were closed for a public holiday on Monday.

Mainland media group Caixin reported on Monday that China’s first debt-to-equity swap may reach 1 trillion yuan (HK$1.20 trillion) to curb its bad loan problem in the next three years, citing an unnamed source from a policy bank.

The scheme would allow commercial lenders to swap non-performing loans of companies for stakes in those firms.

“It’s one solution taken by the authorities to tackle the non performing assets of the banks and that’s seen in a positive light by the market,” said Louis Wong Wai-kit, Philip Securities director of asset management.

Chinese commercial bank’s non-performing loans surged to 1.22 trillion yuan at the end of 2015, the highest since June 2006.

Wong added that mainland markets were also propped up by positive economic data from China released last Friday that showed stabilisation of China’s manufacturing sector.

“The Chinese economy is gaining momentum from the release of the purchasing managers’ index (PMI), and lend support to the market today,” said Wong.

China’s official manufacturing PMI for March printed at 50.2, nudging above the 50 threshold that separates expansion from contraction for the first time in eight months, according to data released April 1. The result was above consensus expectations of 49.4, and up from February’s reading of 49.

Wong expects the benchmark Shanghai Composite Index to rally further if it’s able to maintain above 3,000 points.

“The Hong Kong market is taking a pause...after a rebound of 2,000 points since the February low. There’s no new impetus to lead the market higher,” said Wong.

Wong added that the consolidation of the Hong Kong market was “good and healthy” after its recent rally over the past few weeks.

Linus Yip, chief strategist at First Shanghai Securities said he expected Hong Kong stocks to remain in a narrow range in the next few weeks, but wouldn’t rule out the possibility of a sharper drop upon the release of China’s data announcements in the second quarter.

Macau casinos were the among the biggest losers during the session, as a group dropping 2.01 per cent

Galaxy Entertainment shares slid 4.11 per cent to HK$26.85.

Among stocks with the highest turnover, the banking and insurance industry led the action to the downside in Hong Kong as the sector retreated 1.20 per cent and 0.71 per cent respectively.

Among individual stocks, shares of PICC Property and Casualty, Asia’s largest non-life insurer, slid 2.1 per cent to HK$13.7.