China markets inch up while Hong Kong shares slide 1pc

Hang Seng Index drops 0.6 per cent at the lunch hour break

PUBLISHED : Wednesday, 11 May, 2016, 9:05am
UPDATED : Wednesday, 11 May, 2016, 7:03pm

Hong Kong and Shanghai shares struggled on Wednesday as investors stayed largely on the sidelines waiting for fresh catalysts to drive benchmarks higher.

After opening higher following a rally in the US overnight, the Hang Seng Index closed the day down 0.93 per cent, or 187.39 points, at 20,055.29. The Hang Seng China Enterprises Index slipped 0.50 per cent, or 42.49 points, to 8,443.67.

The heavily weighted banking stocks fell 0.41 per cent on average. HSBC lost 0.92 per cent to HK$48.3. ICBC, the world largest commercial bank by assets, dropped 1.25 per cent to HK$3.94.

Hong Kong Exchanges and Clearing flatlined after announcing a 9 per cent year-on-year profit drop in the first quarter.

“It’s a normal correction after Tuesday’s small rebound,” said Kingston Lin King-ham, director at security brokerage AMTD, “There is neither any good news to push up the market nor any bad news to drag it down.”

Lin’s view was echoed by Ben Kwong Man-bun, executive director of KGI Asia. “It’s understandable why Hong Kong stocks retreated after rallying for two months as there have been no news to pep up the market,” said Kwong. “Investors are taking a wait-and-watch approach. I see no big decline or increase in May. The Hang Seng Index is expected to swing between 19,500 and 20,500.”

The Hong Kong market may continue to be in a holding pattern until Zhang Dejiang, who chairs the National People’s Congress Standing Committee and oversees Hong Kong affairs, visits Hong Kong on Tuesday, as investors expect him to announce the launch date for the much-awaited Shenzhen-Hong Kong stock connect scheme, said AMTD’s Lin. But Kwong said he does not expect the market to pick up after Zhang’s visit, and stay more or less lacklustre this month.

Chief Executive Leung Chun-ying said on Tuesday that Hong Kong is ready for the new stock connect with Shenzhen and that he hopes the scheme to be launched as soon as possible.

Mainland Chinese markets fared slightly better on Wednesday, with the Shanghai Composite Index rising 0.16 per cent, or 4.45 points, to 2,837.04. The CSI 300, which tracks large companies listed in Shanghai and Shenzhen, increased 0.45 per cent, or 13.7 points, to 3,082.81.

The Shenzhen Composite Index inched down 0.62 per cent to 1,791.06 while ChiNext declined 0.94 per cent to 2,034.93.

“Investment sentiment is still weak. The turnover is slim when stocks rise but increases when they slide,” said Lukfook Financial analyst Xie Jinchao.

The Economic Information Daily, owned by Xinhua, said in a front-page article on Wednesday that China’s “national team” should reduce its activities in the stock market unless drastic volatility occurs as their acts of “buying low and selling high” creates conflict of interest vis-a-vis retail investors.

“The China Securities Regulatory Commission (CSRC) is working hard to regulate the market and reduce speculative trading,” Xie said.

Shares of US-listed Chinese firms rebound on Tuesday after declining for three straight days following the CSRC’s statement that it was conducting an in-depth analysis and research on the impact of Chinese companies seeking to re-list domestically after delisting from overseas markets.

China-listed shell companies used for backdoor listings also jumped in early trading on Wednesday following the rebound of US-listed Chinese stocks. Zheng Hong Technology rose 1.33 per cent while Citic GuoAn Wine added 0.83 per cent.