China stocks end lower as IPO resumption looms, Hong Kong shares also down on weakness in tech and autos

Major indexes reverse from early gains to end lower

PUBLISHED : Thursday, 26 November, 2015, 7:16pm
UPDATED : Thursday, 26 November, 2015, 7:16pm

Chinese stocks reversed from earlier gains to close lower on Thursday, as investors looked ahead to the resumption of IPOs next week, with the first batch of 10 slated to begin order taking following a four-month ban on new listings.

The Shanghai Composite Index dropped 0.3 per cent to end at 3,635.55, snapping a two-day winning streak. The large-cap CSI300 finished 0.6 per cent lower at 3,759.43. Turnover increased to 426 billion yuan in Shanghai, against 382 billion yuan on Wednesday.

The tech-heavy Shenzhen Composite Index lost 0.8 per cent to 2,325.69, and the ChiNext Index, a gauge tracking smaller companies in Shenzhen, tumbled 2.2 per cent to 2,833.20.

Hong Kong stocks also reversed from earlier gains to close in negative territory, with the Hang Seng Index ended down 0.1 per cent at 22,488.94, extending its losing streak to a fourth day. The Hang Seng China Enterprises Index edged 0.2 per cent lower to 10,108.39. Turnover remained low, easing to HK$62 billion from HK$65 billion in the prior session.

In currencies, the People’s Bank of China set the yuan midpoint at 6.3896 per US dollar on Thursday, 19 basis points weaker than Wednesday’s level. The onshore yuan traded almost unchanged at 6.3895 per dollar, while the offshore yuan weakened 0.17 per cent to 6.4326 to the dollar.

Ten companies will begin taking subscriptions for new share offerings on the mainland from Monday to Wednesday. The order taking is expected to lock up around 1 trillion yuan, according to estimates by Macquarie Securities.

These are the first batch from a group of 28 companies that had previously gained IPO approval, however the proceedings were suspended by mainland authorities in an effort to calm unruly markets during the summer. The China Securities Regulatory Commission last week granted permission to resume the IPO activities.

Analysts said the markets currently lack positive drivers, as investors await several key events next week, including a vote by the International Monetary Fund’s executive board on the yuan’s inclusion on Special Drawing Rights basket on Monday. The closely-watched Purchasing Managers’ Index as well as employment data on China and US, to be separately released later in the week, will also be on investors’ radar.

“There is not enough momentum to lend force to a sustained rally,” said Louis Tse Ming-kwong, director at Hong Kong-based VC Brokerage.

Electric car manufacturer BYD led losses in the auto sector, after Morgan Stanley downgraded its view on the stock to “equal weight” from overweight. This means that the broker expects BYD’s share performance to be in line with the average return of automotive companies in the analysts’ coverage, whereas previously it had expected the company to perform better than other in its industry.

Morgan Stanley slashed its target price 25 per cent to HK$45 a share, citing reduced government subsidies for electric vehicles and lack of charging facilities affecting its sales.

BYD shares sank 6.2 per cent to HK$ 41.55 in Hong Kong. Rival Dongfeng Motor Group retreated 2.2 per cent to HK$10.70, and BAIC Motor fell 1.5 per cent to HK$7.86.

In Shanghai trade, Guangzhou Automobile Group tumbled 3.2 per cent to 22.20 yuan, and Great Wall Motor skidded 3 per cent to 13.13 yuan.

Among other market movers, Chinese online major Tencent Holdings broke a seven-day bull streak, easing 0.4 per cent to HK$155.7, while news that PetroChina would inject a natural gas unit into Kunlun, helped send the shares of its subsidiary 3.3 per cent higher.

Looking ahead, analysts from Wing Fung Securities said Hong Kong stocks may continue to trade range-bound until the US Federal Reserve makes a decision on whether to raise interest rates at the conclusion of its policy board meeting on December 16.