Hong Kong Stock Exchange

Hong Kong and mainland China stocks deepen losses after disappointing PMI data

PUBLISHED : Monday, 01 February, 2016, 9:28am
UPDATED : Monday, 01 February, 2016, 1:30pm

Hong Kong and mainland China stocks followed the morning’s losses to open the afternoon session lower, as two closely watched gauges of China’s factory activity showed the sector remains mired in contraction territory.

Hong Kong’s benchmark Hang Seng Index fell 0.77 per cent or 151.07 points to 19,542.04 while the Hang Seng China Enterprises Index dropped 1.45 per cent or 119.20 points to 8,122.16.

The Shanghai Composite Index lost 1.81 per cent or 49.61 points to 2,687.99, and the CSI 300 shed 1.53 per cent or 44.98 points to 2,901.11.

The tech-heavy Shenzhen Composite Index dropped 1.03 per cent or 17.33 points to 1,672.10 and the Nadaq-style ChiNext Index fell 0.66 per cent or 13.10 points to 1,980.97.

Earlier in the day, data from the National Bureau of Statistics showed China’s Purchasing Managers’ Index (PMI) declined to 49.4 in January from 49.7 in December. The result fell short of market expectations, as analysts had forecast a 49.6 reading in a survey by Reuters. It was also the sixth straight month that the reading remained below 50, a level that separates expansion from contraction. The official non-manufacturing PMI fell to 53.3 in January from a 16-month high of 54.4 in December.

Meanwhile, the Chinese Caixin manufacturing PMI, a closely watched private gauge of the factory activity, ticked up to 48.4 in January from 48.2 in December, but still in contraction territory.

“Today’s China PMI numbers confirm that momentum in Chinese economic activity has continued to weaken into 2016,” Angus Nicholson, an analyst for IG Group, said in a research note on Monday. “It is quite concerning that the significant monetary and fiscal stimulus in 2015 has only managed to slow the rate of decline in China’s industrial activity.”

Nevertheless, he said the first quarter of activity was usually the weakest in China due to the seasonal disruption of the Lunar New Year and whether China could hit its lowered growth target of 6.5 per cent this year remained to be seen.

“The big question is how much of this first-quarter weakness in China will carry over to the second quarter,” Nicholson said.

In Hong Kong, mainland Chinese financial stocks declined, with China Life Insurance tumbling 3 per cent to HK$18.22, Industrial and Commercial Bank of China dropping 1.7 per cent to HK$3.96, and China Construction Bank losing 0.4 per cent to HK$4.71. Offshore oil producer Cnooc fell 4.4 per cent to HK$7.53.

In the currency market, offshore yuan traded at 6.6049 at noon, weaker by 0.18 per cent from Friday. The Hong Kong dollar was at 7.7822 per US dollar at noon, weaker by 0.03 per cent from the previous session.

On Friday, US stocks rallied to close higher, after the Bank of Japan surprised markets by lowering a benchmark interest rate to minus 0.1 per cent, the first negative interest rate policy it has adopted. The S&P 500 climbed 2.5 per cent or 46.88 points to 1,940.24, the Dow Jones Average also jumped 2.5 per cent or 396.66 points to 16,466.30, and the Nasdaq Composite rose 2.4 per cent or 107.28 points to 4,613.95.

Most Hong Kong stocks listed in the US as American Depository Receipts (ADRs) closed higher than their Hong Kong counterparts after conversion into the local currency. HSBC’s ADR finished at a converted price of HK$55.097, up 1.1 per cent from its Hong Kong close, Sinopec ended up 1.2 per cent to close at HK$4.382, and PetroChina inched 0.1 per cent higher to close at HK$4.756.

On Friday, Hong Kong’s Hang Seng Index gained 2.5 per cent to close at 19,683.11, extending a three-day winning streak. For the week, the index was up 3.2 per cent. However, it still logged a 10.2 per cent loss for January, the biggest monthly decline since August.

With additional reporting from Enoch Yiu