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Hong Kong, Shanghai stocks little changed after PMI data

Hang Seng Index advances 0.1 per cent; Shanghai Composite slips 0.1 per cent

PUBLISHED : Wednesday, 01 June, 2016, 10:27am
UPDATED : Wednesday, 01 June, 2016, 9:02pm

Hong Kong and mainland Chinese shares were little changed on Wednesday amid mixed economic signals and as stocks were in consolidation mode after sharp gains in the Hang Seng during the prior nine sessions.

In Hong Kong, the Hang Seng Index dropped 0.35 per cent or 72.32 points to 20,742.77. The Hang Seng China Enterprises Index inched up 0.06 per cent, or 5.26 points, to 8,710.16.

China’s benchmark Shanghai Composite Index slipped 0.11 per cent, or 3.11 points, to 2,913.51.

The CSI 300, which tracks large companies listed in Shanghai and Shenzhen, slid 0.28 per cent or 9.01 points to 3,160.55.

Among mainland shares, the banking and insurance sector 1.1 per cent, offsetting gains in the manufacturing and coal mining industry.

China’s official manufacturing purchasing managers’ index (PMI) for May was unchanged at 50.1, beating analysts expectations of 50, according to a poll by Bloomberg. The index tracks the performance of large manufacturing enterprises such as those in the steel and coal mining industry.

However, the private Caixin/Markit manufacturing PMI, which is skewed towards smaller companies, was at 49.2, reflecting the 15th straight of contraction.

A PMI reading below 50 indicates contraction.

Analysts from the Bank of America Merrill Lynch said the data suggested business sentiment in the industrial sector remained stable.

Merrill noted that a sub-index of the PMI which tracks the construction industry was at a nine-month high.

“It confirms our view that property and infrastructure investment demand is on the mend,” said a BofA Merrill Lynch report.

Andrew Sullivan, managing director of sales trading for Haitong International said that the stabilising data reduced the chances that authorities would introduce new stimulus measures.

Linus Yip, First Shanghai Securities chief strategist, said Hong Kong stocks have entered a consolidation period after surging over 1,000 points in nine days.

“I won’t say a correction is coming, but the benchmarks have reflected the expectation of MSCI possibly including A shares and the Shenzhen Hong Kong Stock Connect. There is a lack of momentum and it’s time to see whether the expected news will really pan out,” Yip said.

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Goldman Sachs said Tuesday there was a 70 per cent chance that mainland shares would be added to the MSCI’s emerging markets index during its annual review this month, upping its forecast from a 50 per cent chance in April. Goldman cited changes that have made it more difficult for companies to suspend share trading for an extended period and clarification about beneficial ownership rules as reasons that the odds of inclusion into the MSCI have increased.

Kenny Tang Sing-hing, chief executive of Jun Yang Securities, said that most investors are still holding back given Wednesday’s tight trading range and slim turnover.

“Most players are still holding a wait-and-see attitude. Even if sentiment has improved, they’re still not buying aggressively,” said Tang.

Among stocks with the largest turnover, Tencent’s shares moved down by 1.67 per cent to HK$170.4 per share, while HSBC’s shares fell 1.66 per cent to HK$50.35.

In other Hong Kong trading, China Mobile gained 2 per cent. However, Macau casino stocks were pressured after data for May showed gross gaming revenue of 18.4 billion patacas, a 9.6 per cent decline on year. Analysts polled by Bloomberg were expecting revenue to drop 8 per cent on average. Wynn Macau shares were down 1.3 per cent.

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