Hong Kong Stock Exchange

Shanghai, Hong Kong notch healthy weekly gains

Bargain hunting and expectations of new stimulus to shore up mainland economy underpin weekly gain

PUBLISHED : Friday, 19 February, 2016, 9:04am
UPDATED : Friday, 19 February, 2016, 8:49pm

Mainland Chinese stocks ended fractionally lower on Friday, but capped their best week in two months, lifted by investors’ bargain hunting after recent losses, and expectations China will step up efforts to stabilise the economy before the upcoming National People’s Congress meeting in early March.

The Shanghai Composite Index dipped 0.1 per cent to close at 2,860.02. For the week it advanced 3.5 per cent, trimming losses since the start of the year to 19 per cent.

The large-cap CSI300 was also marginally lower, down 0.1 per cent at 3,051.59. The Shenzhen Composite Index rose 0.5 per cent to 1,850.51, and the Nasdaq-style ChiNext Index was up 0.9 per cent to 2,211.01.

Market turnover for Shanghai and Shenzhen decreased to 481.4 billion yuan (HK$ 573.5 billion) from 591 billion yuan in the previous day.

Analysts said bargain hunters are buying the dip after the recent stock rout, particularly beaten-down sectors like financial and energy stocks. Investors also anticipate more stimulus measures could come out before the NPC meeting on March 5, as the Chinese government often intervenes to prop up share prices before the annual legislative meetings.

“This week’s rebound in the A-share markets could continue after the NPC meeting, until late March or early April, as the authority usually wants to maintain stability during the top legislative sessions, while institutional investors may also hope to take the opportunity to re-position their portfolios,” said Wan Rong, analyst for China Fortune Securities.

On Tuesday, the People’s Bank of China reported that China’s new yuan loans soared to a record 2.5 trillion yuan in January.

“It [January bank lending) sent out a strong signal to the markets,” Wan said, “ The surge in new credit indicates the start of another loosening cycle of the central bank.”

On Friday, banking stocks pulled back after recent gains, amid unconfirmed media reports that the PBOC will unveil a targeted increase in the reserve requirement ratio for some regional and other lenders, in an effort to contain financial sector risk.

Nevertheless, the move may just be a “punitive measure” on those lenders that lent money too fast and does not signal a tightening of monetary policy, as the real economy still remains weak, Minsheng Securities said in a research report on Friday.

In Shanghai, China Minsheng Banking Corp and China Merchants Bank both fell 0.9 per cent, closing at 8.51 yuan and 14.76 yuan respectively. ICBC dropped 0.7 per cent to 4.03 yuan, and China Construction Bank shed 0.6 per cent to 4.69 yuan.

Other market movers included coal producer China Shenhua Energy, shares of which fell 0.7 per cent to 13.38 yuan, and rival China Coal Energy, which dropped 0.4 per cent to 4.81 yuan.

Looking ahead, analysts expect A-shares to continue their upward trend with caution, as investors closely monitor for signs the government may introduce new policy.

“The markets may take a circuitous route,” Wan said.

On Friday, Hong Kong’s Hang Seng Index closed 0.4 per cent lower at 19,285.50, ending the week with a gain of 5.3 per cent. So far this year, the index lost 12 per cent.

Louis Tse Ming-Kwong, director of VC Brokerage, said the Hang Seng Index might meet resistance at the 19,800 level, and could test 20,200 if oil prices further stabilise.

Elsewhere in the region, Japan’s Nikkei Average fell 1.4 per cent to 15,967.17, Australia’s S&P/ASX 200 eased 0.8 per cent to 4,952.8, while South Korea’s Kospi Composite Index gained 0.4 per cent to 1,916.24.

With additional reporting by Xie Yu.