Daily Report

Hong Kong stocks ease, while Shanghai shares notch gains following softer April manufacturing data

PICC Property tumbles on reported stake selling by AIG

PUBLISHED : Tuesday, 03 May, 2016, 11:24am
UPDATED : Tuesday, 03 May, 2016, 6:02pm

Mainland Chinese stocks saw the biggest gains in five weeks on Tuesday, while Hong Kong stocks retreated following weaker than expected data from China’s manufacturing sector in April.

China’s benchmark Shanghai Composite Index ended 1.85 per cent higher, adding 54.32 points to 2,992.64. The rise was the greatest daily increase since March 30, when stocks rallied 2.77 per cent. The CSI300, which tracks large companies listed in Shanghai and Shenzhen, advanced 1.8 per cent, or 56.79 points to 3,213.54.

In Hong Kong, the Hang Seng Index closed 1.85 per cent lower, shedding 390.11 points to 20,676.94. The Hang Seng China Enterprises Index dropped 2.13 per cent to close at 8,748.70.

“The strength in the Shanghai market is quite unexpected, since the [Purchasing Managers Index] figure is quite weak,” said Ivan Li, an equities analyst at Tung Shing Securities.

The Caixin Purchasing Managers’ Index (PMI), a privately produced measure of China’s factory activity, fell unexpectedly to 49.4 in April, down from 49.7 in March and missing market expectations of 49.9.

China’s official manufacturing PMI stood at 50.1 in April, also down from 50.2 in March, the National Bureau of Statistics reported over the weekend. The figure was below an estimated reading of 50.4 in a Reuters poll of analysts.

China’s official manufacturing gauge for April indicates moderate recovery, but analyst flag deepening systemic risks

The weaker-than-expected readings reflect worries over the growth sustainability after March’s economic data surprised on the upside, but the ongoing property rebound should continue to support the economy for at least a few months, according to analysts.

However, Julian Evans-Pritchard from Capital Economics in Singapore said the data still points to an upbeat second-quarter outlook.

“The upshot is that although they missed expectations, the latest PMI readings do little to alter our view that China is in the midst of a cyclical rebound that should continue for at least another couple of quarters,” Evans-Pritchard said.

Mainland media reported that the Chinese government said it would monitor the stock market to protect investors, citing a meeting last week by the Politburo Standing Committee, China’s top decision making body.

Chinese markets advanced in spite of lower than average trading volume, which reached about 300 billion yuan (HK$360 billion), compared to a peak of 2 trillion yuan, Li added.

Meanwhile, Hong Kong markets reacted negatively to the weaker than expected data, with the insurance and banking sectors leading the losses.

PICC Property & Casualty Insurance, China’s largest non-life insurer, sank 5.92 per cent to HK$13.36, after media reports said AIG has raised approximately HK$9.7 billion by selling a big chunk of its stake in the mainland insurer.

Chinese internet search giant Baidu saw its New York-listed stocks slide 7.9 per cent on Monday night to US$178.91, after China’s internet regulator launched a probe into the company following the death of a student who had sought treatment for cancer from a paid advertiser on the Baidu site.

China launches probe into Baidu over paid search listings after student dies following cancer treatment sourced online

Baidu said it is cooperating with the investigation.

Shares of two health companies listed on the Hong Kong market that have ties with an organisation linked to the Baidu scandal tumbled following the news reports.

Shares of Huaxia Health and Harmoni Care, both controlled by businessmen in Fujian province, dived 13.12 per cent and 3.17 per cent respectively.

Additional reporting by Xie Yu