Update | Shanghai shares tumble after regulator's warning, while Hong Kong market ends flat
Shares in Shanghai slumped on Tuesday after the mainland China securities regulator issued a fresh warning against speculation in the market, while Hong Kong’s benchmark index pared earlier losses to end flat.
The Shanghai Composite Index tumbled 1.13 per cent, or 51.18 points, to end at 4476.22, after the release of a statement from the China Securities Regulatory Commission. “The investing public should be aware of risk management and don’t use borrowed money or sell your properties to buy stocks,” the regulator said, in the second such alert by officials over the past week.
In Hong Kong, the Hang Seng dropped more than 184 points in the afternoon, before closing up 0.03 per cent, or 9.16 points at 28,442.75. The declines were reversed following reports that authorities in mainland China may launch a bond-buying programme. The H-share index of mainland Chinese stocks listed in the city dropped 0.18 per cent, or 27 points, to 14,714.
Some HK$171 billion worth of shares changed hands, a drop of 10 per cent from the turnover on Monday.
Shares of Citic, a state-owned property-to-steel conglomerate, surged 5.8 per cent to a five-day high of HK$15.70, after analysts at Bank of America reiterated a buy rating on the stock, citing better than expected prospective earnings.
The media reports that the People’s Bank of China is considering buying local government debt in exchange for new loans came about 30 minutes before the close of trading. The plan, if introduced, would boost liquidity in the economy.
“The Hong Kong stock recovery was mainly due to expectations for further proactive easing measures from the Chinese central bank,” said Ben Kwong Man-bun, a director at KGI Asia. He said the upbeat performance of Citic was attributed to new capital flows from fund managers buying market laggards in the rally before the end of month settlement of Hang Seng Index futures.
However, Kwong said that, following a 1 percentage point cut to banks’ reserve requirements this month, the market response to the liquidity boost was modest, as the move was seen as having little impact in reducing real lending rates.
The latest cut to reserve requirements, the steepest single reduction since the global financial meltdown in 2008, suggests the central bank’s eagerness to step up efforts to counter a slowing economic growth.
In the broader market, PetroChina gave up almost 5 per cent to HK$10.12, after the country’s biggest oil and gas producer delivered an 82 per cent decline in net profit for the first three months this year. It was the worst quarterly reading since the company was listed more than 15 years ago.
Sinopec gave up 4.85 per cent to HK$7.26. The stock had jumped 7 per cent on Monday amid speculation over a potential merger with PetroChina. CNOOC fell 0.9 per cent to HK$13.30.
