China, Hong Kong stocks close flat as energy shares retreat

Hang Seng Index sheds 0.73 per cent, while Shanghai Composite off 0.05 per cent

PUBLISHED : Wednesday, 04 May, 2016, 9:19am
UPDATED : Wednesday, 04 May, 2016, 6:36pm

Both mainland Chinese and Hong Kong stocks closed flat on Wednesday, posting small losses after commodity shares took a hit as crude prices fell.

China’s benchmark Shanghai Composite Index closed 0.05 per cent or 1.37 points lower at 2,991.27. The index was volatile for most of the day, and ended up reversing the gains of a five week high in the previous session. The CSI300, which tracks large companies listed in Shanghai and Shenzhen, slid 0.13 per cent, or 4.08 points to 3,209.46.

The Shenzhen Composite Index was virtually unchanged at 1,928.63, and the Nasdaq-style ChiNext Index also traded flat at 2,211.02.

In Hong Kong, the Hang Seng Index closed 0.73 per cent lower, shedding 151.11 points to 20,525.83. The Hang Seng China Enterprises Index, which measures mainland companies listed in Hong Kong, dropped to a one month low, falling by 0.59 per cent to close at 8,697.37.

The coal industry led the losses in the mainland market, with the sector declining by 1.09 per cent. Share prices of 42 out of 46 Shanghai-listed coal mining companies tumbled.

Kenny Tang Sing-hing, chief executive at Jun Yang Securities, said investor sentiment has become more cautious given the strong Japanese yen.

“When the Japanese yen goes up, the market worries that the risk appetite in the regional market will deteriorate, so there’s some selling pressure on the commodities,” said Tang.

Given the move in commodity prices, the materials and energy sectors are set for a difficult session
Angus Nicholson, IG Group

Tang added that the Shanghai index was testing resistance at a key psychological level of 3,000 and was unlikely to break through until after some consolidation.

A sharp fall in crude futures on Tuesday night weighed on the energy sector in Hong Kong.

Among stocks with the largest turnover in Hong Kong, offshore oil producer CNOOC tumbled 3.29 per cent to HK$9.12, refining giant Sinopec skidded 2.6 per cent to HK$5.22, and PetroChina pulled back by 1.07 per cent to HK$5.57.

West Texas Intermediate crude for June delivery extended Tuesday’s losses of a 2.5 per cent fall, dropping 0.14 per cent to US$43.59 a barrel as investors worried that the US weekly crude stockpiles may touch a record high ahead of new data release from the EIA.

On London’s ICE futures exchange, Brent for July delivery declined 0.2 per cent on Wednesday after a 1.9 per cent drop the day before to US$44.88 a barrel.

“Given the move in commodity prices, the materials and energy sectors are set for a difficult session,” said Angus Nicholson, an analyst for IG Group.

“[On Tuesday overnight] we also saw a noticeable increase in credit spreads in fixed income markets, often a clear sign of nervousness in markets,” he added.

Nevertheless, he expects a renewed uptrend for crude oil prices may come soon, as WTI oil has already lost more than 5 per cent in the past three sessions, and a report from the US Commodity Futures Trading Commission showed net futures positions in oil last week reached their most bullish in two years.