Live | China Markets Live - Shanghai stocks suffer heaviest one-day loss since 2007, Hong Kong sinks in sympathy
Welcome to the SCMP's live markets blog. The intense volatility of recent weeks has every chance of remaining the core underlying theme of activity. Investors are increasingly focused the broader question of how this episode might affect the wider economy as many suspect the equity bubble has yet to fully deflate. We'll bring you the key levels, trading statements, price action and other developments as they happen.
4:09pm: The Hang Seng Index gave up 3.07 per cent to finish at 24,356.55, with HK$116 billion worth of shares exchanging hands.
All 50 stocks in the city’s gauge finished in the red, with the oil majors tumbling to their 52-week lows.
The H-share index dropped 3.75 per cent to 11,241.40, dragged by a 6 per cent drop seen in the stock price of China Coal Energy.
For chart on the Shanghai index, clck graph to enlarge.
For chart on Shenzhen index, click graph to enlarge.
3:20pm: Mainland Chinese stocks were battered late in Monday trading, with the Shanghai Composite posting the biggest daily drop in 8 years.
The Index was only down 3.2 per cent by 2 pm, and proceeded to sink 5 per cent in the last hour of trade.
About 2,000 companies were suspended from trading after reaching the daily downside limit of 10 per cent.
Value Partners' chairman Cheah Cheng Hye said the recent correction in the stock markets offers opportunities for the Chinese authorities to speed up their reform process.
He believes the market rout in China is a sign of health correction rather than a crash in the equities market.
3:05pm: The Hang Seng Index declined 3.28 per cent to trade at 24,305.23, with HK$87.6 billion worth of shares exchanging hands.The H-share Index dropped 4.54 per cent to 11,148.75.
3:03pm: The Shanghai Composite Index plunged 8.48 per cent to close at 3,725.56. The CSI 300 Index gave up 8.56 per cent to finish at 3,818.72.
3:03pm The Shenzhen Composite Index dropped 7 per cent to close at 2,160.09, while the ChiNext Board retreated 7.4 per cent to 2,683.45.
2:07pm: Shenzhen Composite Index stands at 2,257.86, down 2.79 per cent or 64.84 points. ChiNext sinks 3.43 per cent, or 99.42 points, to 2,798.41.
2:05pm: Shanghai Composite Index drops 3.22 per cent or 131.07 points to 3,939.84. CSI300 Index falls 3.568 per cent, or 149.03 points to 4,027.25.
2:04pm: Hang Seng Index loses 2.56 per cent, or 642.78 points, to 24,485.73. H-shares Index is trading at 11,287.43, down 3.35 per cent, or 391.59 points.
1:51pm: Cement companies sink like stones on the Hong Kong stock exchange in this five-day view.
Allied Cement Holdings (purple), Dongwu Cement (green) and Asia Cement (China) Holdings (orange) issued negative profit outlooks before today’s trading.
The others are China Resources Cement (blue), West China Cement (yellow) and Annhui Conch Cement (red). Click on graph to enlarge.
1:44pm: Jefferies report on demand for new types of energy in mainland China.
"As China's economy rebalances toward services (from manufacturing and construction) and consumption (from investment), new patterns of resource consumption develop.
Diesel demand increased 1.3 per cent year on year in the first half of 2015, in line with electricity demand and decoupled from GDP growth. Gasoline and kerosene demand, on the other hand, increased 12.1 per cent and 17.4 per cent respectively.
June gasoline demand was adversely affected by heavy rains and flooding in southern China. Gasoline demand nonetheless increased 10.2 per cent year on year. We believe consumption demand for oil is accelerating. Jet fuel (kerosene) demand may have hit an inflection point while gasoline demand growth is slowly accelerating."
To enlarge, please click on the graph.
1:20pm: Hang Seng Index sheds 2.62 per cent, or 657.94 points, to 24,470. H-shares Index stands at 11,282.23, down 3.40 per cent, or 396.79 points.
1:15pm: Poly Culture is among the top losers by ending mornng trade 17.40 per cent down to HK$19.04. This came after it announced a profit warning on Friday and said it expected its interim profit to the end of June to be announced next month may drop up to 50 per cent as a result of slow settlement of its artwork auction business and increase market cost.
The Poly graph is below, click to enlarge please.
1:13pm: Shanghai Composite Index slides 2.582 per cent, or 105.11 points to 3,965.80 at start of afternoon trade. CSI300 Index drops 2.754 per cent, or 115.00 points to 4,061.28.
1:12pm: Shenzhen Composite Index opens afternoon session at 2,282.79, down 1.72 per cent or 39.92 points. ChiNext loses 2.30 per cent, or 66.60 points, to 2,831.22.
12:34pm: Hong Kong Exchanges and Clearing is among the most heavily traded blue chips, down HK$9.8 or 4.45 per cent to finish the morning session at HK$210.2.
This came after a number of investment banks downgraded HKEx as turnover thinned to below HK$100 billion last week, down from the average record month in April at HK$200 billion.
To enlarge, please click on the graph.
12:13pm: Consultations are continuing on possible inclusion of Chinese A shares in the MSCI Emerging Market Index, according to Rene Veerman, managing director and head of client coverage for Hong Kong and Taiwan at MSCI.
"The most relevant, latest revision (of the MSCI Emerging Market Index) was during 2015, which was just over a month ago. This year we would not include China A shares in MSCI Emerging Markets, but the consultation continues," said Veerman in Hong Kong.
Click on the graph below to enlarge.
12:11pm: The Hang Seng Index ended morning trade at 24,422.19, down 706.32 points or 2.81 per cent. The H-share index also extended its decline to 11,257.15, down 421.87 points or 3.61 per cent.
11:39am: The JPMorgan Research Analyst Sentiment Index (JSI) on mainland China, which is the investment bank’s PMI survey where sector analysts act as the ‘purchasing managers’, fell in July to 54.6, compared to 58.2 in June.
“The JSI weakened across output volume/ sales, order book, gross margin and inventory. Only the costs component improved in July.
Industry JSIs improved for property, transportation and gaming but deteriorated for ports,cement, tech and oil & gas.
The second quarter China GDP report and major June indicators came in better than expected, but macro policy will remain accommodative given lingering growth concerns. Our forecast for 2015 GDP remains unchanged at 7.0 per cent,” JPMorgan Greater China Economist Haibin Zhu says.
The sectors with JSI above 50: Property, transportation, insurance, small caps, healthcare, petrochemicals, gaming, banks and water (in descending order).
The sectors with JSI at 50: Toll roads, oil and gas, internet, consumer and construction.
The sectors with JSI below 50: Machinery, IPPs, telecom, China brokers, tech (hardware), ports, metal and mining, gas, shipbuilding, cement and auto (in descending order).
Please see graph below for sector breakdown. To enlarge, click on the graph.
11:37am: The Shanghai Composite Index closes the morning having dropped below 4,000 points once again. It stands at 3,971.54, down 2.44 per cent or 99.37 points. The CSI300 has also fallen to 4,069.73, down 2.55 per cent or 106.55 points.
11:37am: The Shenzhen Composite Index likewise double-dips to close the morning at 2,291.06, down 1.36 per cent or 31.65 points. The ChiNext Price Index fell to 2843.83, down 1.86 per cent or 53.99 points.
11:34am: The Hang Seng Index slides to 24,535.88, down 592.63 points or 2.36 per cent. The H-share index also declines to 11,297.91, down 381.11 points or 3.26 per cent.
11:14am: Onshore spot yuan is trading at 6.2095 against the US dollar, unchanged from Friday close. The offshore yuan stands at 6.2185, stronger by 73 basis points from Friday's finish.
11:11am: Hong Kong dollar is trading at 7.7510 to the US dollar, near upper end of the currency peg. Euro/dlr stronger by 0.19 per cent at 1.1005. Dlr/yen at 124.500, weaker by 0.25 per cent. Pound/dlr stronger by 0.08 per cent to 1.5521. Australian dollar to US dollar stronger by 0.15 per cent to 0.7283.
10:56am: Tighten regulation is impacting China’s shadow banking system as credit flows toward the formal banking system, writes Moody’s analysts.
"The contraction in core shadow banking activity and shift in credit flows back towards the formal banking system improves transparency and lowers financial risks, but could also put pressure on sectors that rely on shadow banking, such as small and unrated property developers and other micro and small enterprises," wrote Stephen Schwartz, a Moody's Senior Vice President.
Still, Schwartz notes that overall credit flows, as measured by total social financing, have held up with support from monetary policy easing.
In particular, non-core components of shadow banking such as umbrella trusts, e-financing, and peer-to-peer lending have been growing at a faster pace, Moody’s found. As such, shifts are taking place in the risk and composition of the broader range of shadow banking activities.
10:46am: In Hong Kong, none of the 40 stocks in the China Enterprises (H-shares) Index have made gains today: all have declined. Only four H-shares of the 212 on the exchange have improved. The Hang Seng Index is faring no better with only one of its 50 stocks up – CLP Holdings.
10:36am: The Hang Seng Index drops to 24,662.74, down 465.77 points or 1.85 per cent. The H-share index slides to 11,384.81, down 294.21 points or 2.52 per cent.
10:36am: The Shanghai Composite Index tops the 4,000 point mark again, reaching 4,042.98, but it is down 0.69 per cent or 27.93 points. The CSI300 moves to 4,151.41, down 0.6 per cent or 24.87 points.
10:36am: The Shenzhen Composite Index improves to at 2,333.55, up 0.47 per cent or 10.85 points. The ChiNext Price Index lifts to 2,913.43, up 0.54 per cent or 15.61 points.
10:34am: DBS calendar of data due out this week. Click to enlarge.
10:28am: Mark Tinker of AXA Investment Managers writes that China’s biggest headache right now is its shadow banking system.
“The reality is that the shadow banking system remains a key problem for the Chinese authorities, frequently undermining their attempts to regulate credit in the economy. Indeed it was almost exactly two years ago when China had a mini credit crisis with overnight rates spiking to 30 per cent as it tried to control the shadow bank lending.
Since then, various wealth management products have led to speculative financing of assets such as commodity inventories or, as discussed last week, the formation of the umbrella trusts that bypassed restrictions on margin finance and helped fund recent stock exchange speculation.
It also led to the boom in peer to peer (P2P) lending that became a self-fulfilling part of the equity bubble as P2P lenders and technology companies soared on the stock market.
The risk for equity markets of course is that the ‘correct’ discount rate for valuation purposes should always be the corporate bond yield not the sovereign yield. This is a better proxy for assessing the cost of capital – against which the potential returns can be judged. It will be interesting to see what business decisions, from capital expenditure to buying back stock are made on the back of this more correct cost of capital."
To illustrate, please look at this graph. Black line = BAA corporate bond yield. Orange line = A corporate bond yields. Yellow line = AA corporate bond yields, and Purple line = high yield grade bonds. To enlarge, please click on the graph.
10:23am: Shares in exchange operator Hong Kong Exchanges and Clearing Limited are being dumped at an unusual rate this morning. The stock has slid 4.09 per cent to HK$211 in early trading, with turnover just exceeding HK$750 million.
10:13am: Jiangnan Group slides 7 per cent to HK$2.04, also leading early turnover with HK$750 million in shares changing hands. The industrial-electrical concern has arranged to place just over 370 million shares at HK$1.95 apiece.
10:13am: Slipping badly is Gome, down 7 per cent to HK$1.35 on its resumption of trading. After halting trading in its share, the consumer electricals seller announced the acquisition of Artway Development Ltd for more than HK$11 billion.
To enlarge,please click on graph (Orange line – GOME, Purple line – Hang Seng Index):.
10:06am: North Mining Shares Company is the early winner in Hong Kong, leaping 37 per cent to 28 HK cents on its resumption of trading after announcing the 65 per cent acquisition of a China investment holding company for HK$949.8 million.
Also doing well is Ngai Shun Holdings, up 18 per cent to HK$1.01 after it proposed a 4-for-1 bonus share issue and increase in authorised share capital from HK$10 million to HK$200 million.
9:45am: DBS report says People’s Bank of China may widen the trading band to 3 per cent from 2 per cent.
“Theoretically, a wider trading range would allow the market to play a bigger role and thus lead to higher forex volatility. We, however, see this a 'symbolic move' as the spot rate is unlikely to have greater price swings in the near term.
Since 19 March, the USD/CNY has stayed within a mere 0.4 per cent on either side of 6.2; despite the recent fall in foreign reserves points to substantial capital outflows.
It underscores Beijing’s intention to keep its currency relatively stable at a time when China’s weakening economic growth is fanning fears of capital flight.
Meanwhile, by keeping the yuan largely stable, China could further promote the cross-border use of the currency. That in turn increases the likelihood of the yuan to be included in the IMF’s SDR basket, which will be decided in November.
The fixing is currently viewed as a policy signal rather than a reflection of the underlying forex supply and demand. An implementation of a more market-oriented fixing would bring the yuan closer to becoming a market-determined currency and narrow the current spot-fix spread.”
9:41am: Rabobank:
“Friday saw more worrying data across the board. In manufacturing, Chinese PMI slumped to 48.2; France slipped to 49.6; even Germany dipped to 51.5; the Eurozone edged down to 52.2; and only the US bucked the trend slightly at 53.8.
Yet US new home sales plunged 6.8 per cent (month on month) with downward revisions to the previous month, making the divergence between new and existing home sales another quandary in the economy. On the back of those results commodities were again pounded almost across the board.
Equities also fell Friday, even in China, while benchmark 10-year US yields dropped to 2.26 per cent.
Pulling those trends together, might the Fed’s 5-year forward breakeven inflation rate have stalled its recent climb at a peak of 2.09 per cent? If so, it has done so at a lower high than the respective lows seen in 2013, 2012, 2011, 2010, and 2009. That should be some food for thought for the Fed as they meet this week and think about just how ‘normal’ things need to be on the interest rate front.”
One year movement of yuan and US dollar. To enlarge, please click on the graph.
9:38am: China Railway Signal & Communication Corp is seeking to raise as much as US$1.8 billion from a Hong Kong initial public offering, Bloomberg reports.
The world’s biggest provider of train traffic control systems is selling 1.75 billion shares at HK$6.30 to HK$8 each, according to documents cited by the news agency.
It said 16 cornerstone investors, including China Railway Group Ltd and Shanghai Zhenhua Heavy Industries Co, had agreed to buy more than half the shares on offer.
China Railway Signal is set to be the first major new listing in Hong Kong since a wave of volatility and panic selling that began in late June wiped as much as US$3.9 trillion from the value of mainland share prices in a little over three weeks.
9:36am: The Hang Seng Index opens at 24,906.78, down 221.73 points or 0.88 per cent. The H-share index opens at 11,532.99, down 146.03 points or 1.25 per cent.
9:36am: The Shanghai Composite Index opens at 3,984.55, down 2.12 per cent or 86.36 points. The CSI300 opens at 4097.02, down 1.9 per cent or 79.26 points.
9:36am: The Shenzhen Composite Index opens at 2,277.62, down 1.94 per cent or 45.09 points. The ChiNext Price Index opens at 2,822.37, down 2.6 per cent or 75.45 points.
9:34am: ING Morning Call:
“Our take on the very disappointing Caixin flash manufacturing PMI was that it picked up the chill in economic activity caused by the stock market panic. In view of the amount of policy stimulus – monetary, macroprudential and fiscal – a continued upward grind was the baseline scenario in the manufacturing PMIs it is still the baseline scenario.”
“We reiterate our forecast of one 25bp policy rate cut and 50bp RRR cut in each of the remaining quarters of the year. The economy can ill afford even a one-month hit to growth, in our view, and by raising the likelihood of one we think the PMI data brought forward the timing of the next monetary easing.”
9:23am: Hong Kong listed companies issuing improved profits outlooks since last closing include Guangdong Land Holdings, China Financial Leasing Group, Wing Lee Property Investments, Hung Hing Printing Group and Winox.
Reduced profits are forecast by K&P International Holdings, Shenguan Holdings, Asia Cement (China) Holdings, Allied Cement Holdings, Sany Heavy Equipment International Holdings, Poly Culture Group, Asiaray Media Group and Tic Tac International.
Losses are projected by Dongwu Cement, Strong Petrochemical Holdings, SPT Energy Group, Fujikon Industrial Holdings, QPL International Holdings, HNA International Investment Holdings, Emperor Watch & Jewellery and Genvon Group.
9:20am: Barclays’ report said DBS second quarter profit better than expected but warns of challenges ahead.
“DBS reported second quarter profit of S$1.12 billion, down 12 per cent quarter on quarter and 15 per cent up year one year.
The beat was due to strong fee income growth, slightly higher-than-expected trading income and lower-than-expected credit cost.
We expect operating conditions in the third quarter to be more challenging than the second quarter given the weaker market-sentiment in Hong Kong and China, muted loan demand and some near-term pressure on margin reflecting China’s interest rate cuts.
Net interest income rose by 3 per cent quarter on quarter and 12 per cent year on year driven by strong margin expansion which rose 6 basis points quarter on quarter to 1.75 per cent.
As we had anticipated, margin expanded due to the repricing effect of a higher Sibor, and lower CNH funding cost in second quarter. Hong Kong margin rose 11 basis points quarter on quarter to 1.67 per cent in second quarter.
Fee income was strong, up 5 per cent quarter on quarter and 14 per cent year on year, led by brokerage and wealth management which benefited from the strong market rally in Hong Kong, investment banking and credit card fees."
9:18am: People’s Bank of China sets the mid-price of onshore yuan trading at 6.1176, weaker by 7 basis points against the US dollar from the Friday fix.
9:15am: Both the Shanghai Composite Index and CSI300 are slightly down in pre-opening. The Shanghai Composite stands at 4,070.52, down 0.01 per cent or 0.39 points, while the CSI300 is at 4,175.12, down 0.28 per cent or 1.16 points.
9:04am: In Hong Kong, July futures contracts are trading at 24,738 points, down 423 points or 1.68 per cent.
9:03am: Architectural firm C Cheng Holdings has been given in-principle approval to transfer its listing from the Growth Enterprise Market (GEM) to the main board of the Hong Kong stock exchange.
9:00am: Zhidao International Holdings has issued a statement regarding messages circulating on WeChat offering a financial product enabling the purchase of shares of the company at substantially below trading price on the expectation that share prices would increase two- to five-fold in one month.
Zhidao’s announcement said it suspected a substantial shareholder and others to be behind the offer but they had denied it. The company’s share price dropped from HK$2.29 to HK$1.59 during the course of last week. It said it had no further explanation for the unusual price movement.
8.57am: The trading volume on the Shanghai A share exchange averaged 720 billion yuan a day last week, up 3.7 per cent from the previous week.
Northbound trades averaged 2.5 billion yuan a day, down 23 per cent on the week. Overall net selling eased to 1.4 billion from 4.5 billion yuan previously.
Southbound trades averaged HK$862 million, down 54 per cent on the week and following the previous week’s steep 56 per cent drop. Net buying of HK$835 million turned around net selling of HK$634 million in the previous week.
The trading volume of Hong Kong's main board averaged HK$81 billion, down 27 per cent for the week, slowing from the 45 per cent volume fall seen in the previous week.
“The discount of H-shares to A-shares was little changed over the week,” analysts at brokerage Jefferies said in a note to clients. “Of the 64 active pairs currently, 62 of them with H-shares trade at discount to A-shares. There were 17 pairs which saw their H-share counterpart narrow their discount to A-shares.”
8:56am: One Shanghai listed A-share company applied to resume trading, lowering the number of firms on suspension in Shanghai down to 80, representing 7.5 per cent of the total.
In Shenzhen, there are a total of nine listed companies who said they will resume trading on Monday while another five applied to voluntary suspend trading on their shares. This will leave 353 firms in Shenzhen in voluntary suspension, representing about 20.41 per cent of the total.
8:47am: China’s securities regulator had 46 per cent more cases on file for investigation in the first half of the year from a year earlier, the China Securities Regulatory Commission says. It says it will step up its crackdown on illicit stake-selling by companies’ substantial stakeholders, insider trading, and cross-market manipulation.
8:08am: Central China Securities plans to raise about HK$2.48 billion through the sale of 592.12 million H shares at a price of HK$4.28 a share.
8:00am: Societe Generale early call:
With this week's FOMC meeting expected to be quite uneventful, the US Q2 GDP figure will be important in fine-tuning lift-off expectations.
Our 3.3 per cent forecast should cement the odds of a September liftoff.
China's manufacturing PMI should drop slightly.We expect China's official manufacturing PMI to decline slightly to 50.1 in July from 50.2 in June.
Meanwhile, UK Q2 GDP growth is expected to rebound to 0.6 per cent qoq propelled by a recovery in services. On Greece, negotiations on an ESM programme may stumble on the question of the IMF's involvement.
On the data front, euro area money supply is expected to remain unchanged and HICP inflation is set to print one tick higher at 0.3 per cent yoy in July.