Daily Report

China stocks extend losing streak to five weeks on growth, stimulus concerns

Shanghai’s A-shares see turnover shrink to a four-month low

PUBLISHED : Friday, 20 May, 2016, 9:19am
UPDATED : Friday, 20 May, 2016, 6:36pm

Mainland Chinese stocks ended Friday on an upbeat note, but still extended their losing streak to five weeks, while turnover for shares in Shanghai shrank to its lowest level in more than four months, as investor concerns mounted over fading economic momentum and Beijing’s recent policy changes to refrain from major stimulus on debt load worries.

In the meantime, increasing fears on a Fed rate rise in June also continued to weigh on investors’ risk appetite.

The Shanghai Composite Index bounced between gains and losses in the morning, but was pushed higher in the afternoon and ended up 0.7 per cent, or 18.57 points, at 2,825.48, snapping a three-day losing streak. However, it still dropped 0.1 per cent for the week, the fifth week of declines. The index has fallen 3.8 per cent for the month so far.

The large-cap CSI300 also rose 0.5 per cent, or 15.72 points, to 3,078.22. The Shenzhen Composite improved by 1.1 per cent to 1,794.95 points. The startup board ChiNext Index finished 1.4 per cent, or 27.9 points, higher at 2,065.3.

Turnover in Shanghai reached approximately 124 billion yuan, the lowest in more than four months. Combined turnover for Shanghai and Shenzhen also fell to 366 billion yuan from 376 billion yuan on Thursday.

“April’s macro data indicated the economic recovery has lost some steam compared with March, “ said Cui Xijun, an analyst for Huarong Securities. “Meanwhile, credit data, in particular new loan figures, came in much lower than expectations,” Cui said.

“Those factors have added to investor worries about the central government’s recent policy change to hold back on strong stimulus. (Investors) can’t count on economic recovery and monetary easing to help shore up stock markets in the short run,” he added.

Cui said the probability is big for Chinese stocks to “spiral down” in the near term.

On the external front, fears mounted on the expectations of a rate rise next month by the Federal Reserve in the United States, weighing on global equity markets and curbing risk appetite, analysts said.

Dickie Wong, the executive director of research at Kingston Securities, said Hong Kong stocks are under much pressure from the prospect of an interest rate rise in June.

“Now the valuation of Hong Kong stocks is relatively low and attractive,” Wong said. “It is no surprise to see a technical rebound after a monthly decline.”

In Hong Kong, the Hang Seng Index closed up 0.8 per cent, or 157.87 points, at 18,952.2. The Hang Seng China Enterprises Index settled 0.7 per cent, or 60.38 points, higher at 8,303.58. Turnover fell to HK$53 billion, 5 per cent less than Thursday.

In mainland markets, brokers gained ground, with Huatai Securities rising 2 per cent to 16.24 yuan, Citic Securities up 1 per cent to 15.69 yuan, and GF Securities higher by 0.9 per cent to 15.31 yuan.

In Hong Kong, property developers were among the top performers. China Resources Land jumped 5 per cent to HK$18.08, and China Overseas Land and Investment climbed 3.5 per cent to HK$22.50.

With additional reporting by Celia Chen