Mainland, Hong Kong stocks close lower after China approves Shenzhen link
Stock markets in the mainland and Hong Kong both closed lower on Wednesday, as investors took profit after China approved the long-awaited Shenzhen-Hong Kong Stock Connect, while worries lingered over a possible interest rate rise as soon as September.
The Shanghai Composite Index fell 0.02 per cent to close at 3,109.56. The CSI 300 Index finished 0.15 per cent lower at 3,373.16. However, the Shenzhen Composite Index increased 0.3 per cent to 2,043.27, and the Nasdaq-like ChiNext also rose 0.3 per cent to 2,208.2.
Property developers, brokerage houses, and banks were among the biggest losers, pulling back after recent gains.
China Vanke skidded 6.2 per cent to 25.85 yuan in Shenzhen. Before Wednesday, the stock had surged by its daily increase limit of 10 per cent for three days in a row.
In Hong Kong, the Hang Seng Index ended down 0.5 per cent to 22,799.78, and the Hang Seng China Enterprises Index lost 0.7 per cent to 9,641.76.
“There are some profit-taking activities as the arrangement for the Shenzhen linkup is clear now,” said Linus Yip Sheung-chi, chief strategist for Hong Kong-based First Shanghai Securities.
“The Shenzhen linkup has increased investors’ interest in small and mid cap stocks. But those stocks are not heavyweights and cannot push up benchmark indexes much,” he said.
“Meanwhile, the US Federal Reserve is trying to maintain the market expectation of an interest rate hike within this year,” he added.
Hong Hao, chief strategist for Bocom International, said the market “had (already) performed ahead of the formal announcement of the stock connect”, and he didn’t expect much positive movement in the short term.
The so-called “concept” stocks related to the Shenzhen connect retreated. Hong Kong Exchanges and Clearing fell 4.69 per cent to HK$191.2. Hong Kong and Shenzhen listed Zhejiang Shibao Company plunged by 10.67 per cent to HK$10.38 and GF Securities was off 3.7 per cent to HK$17.7.
Insurance and mining stocks fell the most, while banking, food and drink, and utilities stocks gained.
After markets closed on Tuesday, Chinese Premier Li Keqiang said that the State Council had already approved the Shenzhen Hong Kong Stock Connect scheme. Regulatory officials announced later that the stock trading link will begin operations within four months, and there would be no aggregate investment quota for the scheme. The existing total quota for the Shanghai Connect will also be scrapped.
The upcoming Shenzhen connect will allow overseas investors to buy 880 Shenzhen stocks.
Among market movers, Tencent Holdings fell 1.23 per cent to HK$193 ahead of its half-year results due later in the day, and China Unicom rose 0.12 per cent to HK$8.4.
Cathay Pacific Airways sank 7.31 per cent to HK$11.92. Earlier in the day, the airline company posted an 82 per cent year-on-year drop in net profit for the first half of the year, much worse than market expectations, due to fewer tourist arrivals, cut backs in corporate travel and intense competition.
Overnight on Tuesday, US stocks fell after two Federal Reserve officials delivered hawkish speeches, indicating an interest rate rise could come as soon as September.
The Dow Jones Industrial Average Index lost 0.45 per cent or 84.03 points to close at 18,552.02, the S&P 500 closed 0.55 per cent lower at 2,178.15, and Nasdaq was down 0.66 per cent to 5,227.11.
On the same day, data showed the US Consumer Price Index in July rose 0.8 per cent year on year, lower than consensus expectations of 0.9 per cent.