Daily Report

Chinese stocks checked with upbeat economic news crossed by ratings downgrade

Chinese and Hong Kong stocks held in place after producer data beat expectations and Standard & Poor’s cut China’s credit rating outlook to negative

PUBLISHED : Friday, 01 April, 2016, 9:30am
UPDATED : Friday, 01 April, 2016, 6:21pm

Chinese and Hong Kong stocks were held in place on Friday by better-than-expected manufacturing data for March that counterbalanced credit risk concerns after ratings agency Standard & Poor’s lowered China’s credit outlook to negative from stable.

The Shanghai Composite Index underwent a ‘V’ shape rebound to end 0.19 per cent, 5.61 points, higher at 3,009.53, reversing the morning’s loss. The CSI300 Index inched up 0.12 per cent, 3.81 points, to 3,221.89.

The Shenzhen Composite Index slid 0.56 per cent, 10.69 points, to 1,901.52. The Nasdaq-like ChiNext Index fell 1.47 per cent, 32.92 points, to 2,205.37.

The Hang Seng Index fell 1.34 per cent, 277.78 points, to 2,0498.92 with the drop led by insurers and retailers. It was the greatest intraday loss since February 25. The Hang Seng China Enterprises Index declined 1.78 per cent, 160.39 points, to 8,842.86.

“A-shares rebounded as China’s purchasing managers’ index (PMI) shows the economy in the second quarter will recover,” Louis Wong Wai-kit, Philip Securities director of asset management, said. “Hong Kong stocks were more likely to be affected by the external environment.”

China’s official data showed on Friday that PMI rose to 50.2 in March from 49.0 in February and beat estimates of 49.3 from a Reuters poll of analysts. It was the first time since July that the gauge exceeded the 50 mark. A measure above that level shows growth, below it, contraction.

The privately-produced Caixin manufacturing PMI rose to a 13-month high of 49.7 in March, well above a 48.3 estimated by market analysts.

Standard & Poor’s cited increased economic and financial risks facing the Chinese government’s creditworthiness when in lowered the second-largest economy’s credit-rating outlook to negative from stable. It said Chinese government and corporate leverage ratios are likely to deteriorate and the investment rate could be well above what it believes to be a sustainable level.

Salt was added to local stock market wounds by disappointing retail- and gaming-sector data.

Casino operator Sands China shares tumbled 4.75 per cent to HK$30.10 — the worst performer among blue-chips. Galaxy Entertainment shares lost 3.78 per cent after the Macau government said gaming revenue fell 16 per cent in March year-on-year.

Watch sellers Ernest Borel shares dived 7.97 per cent, accompanied by those in Chow Tai Fook Jewellery and Luk Fook after the Hong Kong government said retail sales shrank an annual 20.6 per cent in February, the worst number for 17 years.

Wong of Philip Securities said Standard & Poor’s downgrade will not massively impact the stock market because the signal of better economic growth in the second quarter can cancel out concerns over credit risk.

On a weekly basis the Shanghai Composite Index gained 0.1 per cent, or 30.10 per cent. The Hang Seng Index gained 0.75 per cent, 153.31 points.

Additional reporting by Laura He.