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Hong Kong, Shenzhen stocks lose steam as ‘connect’ euphoria fades and worries persist over Italy vote

Shanghai stocks edge higher after a choppy session

PUBLISHED : Tuesday, 29 November, 2016, 9:21am
UPDATED : Tuesday, 29 November, 2016, 10:22pm

Hong Kong and Shenzhen stocks pulled back to close lower on Tuesday as investors took profits on recent rallies amid fading optimism about the upcoming Shenzhen-Hong Kong Stock Connect, while concerns over the looming Italian referendum and a highly-anticipated US rate increase in December fuelled caution.

Hong Kong’s benchmark Hang Seng Index retreated from its highest close in nearly three weeks on the previous day, down 0.4 per cent or 93.5 points to finish at 22,737.07.

The Hang Seng China Enterprises Index dropped 0.3 per cent or 29.33 points to 9,846.21.

Turnover fell slightly to HK$69 billion from Monday’s HK$71 billion.

Shenzhen’s major stock indexes all settled lower. The Shenzhen Component Index fell 0.3 per cent to 11,034.7, the Shenzhen Composite Index lost 0.8 per cent to 2,110.36 and the start-up board index ChiNext ended down 0.3 per cent at 2,160.35.

However, the benchmark Shanghai Composite Index edged higher after a choppy session, up 0.2 per cent or 5.92 points to close at 3,282.92. The gains helped extend the index’s winning streak to four days.

Combined turnover for Shanghai and Shenzhen markets rose to 690 billion yuan from Monday’s 642 billion yuan.

The outcome of the upcoming Italian referendum could elevate political risks in Europe
Luo Zhiheng, Guotai Junan Securities

“With the Shenzhen-Hong Kong Stock Connect set to debut next Monday, we should be aware of possible profit taking in the near term, in particular in the broker sector,” analysts from Hong Kong-based Emperor Securities wrote in a Tuesday note.

“Investors are also waiting to see how stock markets will react after the official open of the trading link,” they added.

In the meantime, investors turned more cautious as they weighed possible political risks from Italy’s constitutional referendum this Sunday and an expected December rate increase by the US Federal Reserve.

“The outcome of the upcoming Italian referendum could elevate political risks in Europe and create significant volatility in equity markets,” said Luo Zhiheng, an analyst for Guotai Junan Securities.

“Markets also see a higher likelihood for the Fed to raise rates in December, as the US economy is showing unexpected strength,” he said.

In Hong Kong, energy stocks suffered after oil prices fell amid uncertainty over the outcome of the forthcoming Opec meeting in Vienna on Wednesday. Sinopec dropped 0.4 per cent to HK$5.44 and PetroChina lost 0.2 per cent to HK$5.34.

Coal mining giant China Shenhua fell 2.8 per cent to HK$16.24 while China Coal Energy tumbled 3.8 per cent to HK$4.03.

However, in Shanghai, rail firms and ship makers added to recent gains. Rolling stock manufacturer CRRC Corp soared by its daily limit of 10 per cent to 11.8 yuan, China Railway Group jumped 4.1 per cent to 10.24 yuan, and China Communications Construction gained 1.8 per cent to 16.88 yuan. Meanwhile, China Shipbuilding Industry advanced 4 per cent to 7.3 yuan, China CSSC Holdings climbed 2.6 per cent to 24.49 yuan, and CSSC Offshore and Marine Engineering Group rose 1.9 per cent to 28.33 yuan.