Click to enlarge the chart below (percentages are against today’s opening).

3:42pm: Lenovo Group tumbles further to HK$8.22, down 2.26 per cent on the day, after hitting its 12-month low around a month ago. The stock has not arrested its decline despite numerous analysts rating it ‘buy’ or ‘hold’ with target prices above the current level. 

Click to expand this two-year view of Lenovo (orange) tracking against the Hang Seng Index.

3:31pm: HSBC Holdings jumps to the top of the Hang Seng, adding 62 points to the index and leading percentage gainers with a 2.51 per cent uplift to HK$71.45. No other company has improved as much as 1 per cent.  

China Mobile and AIA are taking the most points off the index, 35 and 32 respectively. Other large caps trading down and dragging on the index are Ping An and Tencent. Mengniu Dairy remains the biggest percentage loser, 4.71 per cent down.

3:13pm: The Shanghai Composite index pared its losses late to close at 3,622.91, down 1.11 per cent for the day. The CSI 300 also picked up just before the bell pushing the index into positive territory to close up 0.33 per cent at 3,829.24. 

3:13pm: The Shenzhen Composite Index fell 2.72 per cent to close at 2,053.12. The ChiNext slid 5.53 per cent to finish at 2,399.27

3:13pm: Hang Seng Index has dropped 0.85 per cent to 24,425.65. the H-shares Index stands at 10,979.24, down 1.37 per cent. 

2:53pm: The Hang Seng China Enterprises Index – also known as the H-shares index, comprising 40 top China company stocks traded in Hong Kong – has dipped below the 11,000 mark for the first time this year. Click the chart to enlarge.

2:41pm: HSBC said the upward move in USD-CNH is overdone and Beijing will not deliberately weaken the RMB to boost economic growth. 

“The RMB is facing two opposing forces: cyclically, looser monetary policy has taken away some carry support; structurally, however, efforts to internationalise the currency are key anchors for the RMB (Rise of the Redback Special). Specifically, FX policy has been used to maintain the RMB’s stability, despite the broad USD strength.”  

2:26pm: Real estate developer Evergrande has slid 6 per cent to HK$4.82 today. Last week, Goldman Sachs reiterated its ‘sell’ rating for the stock and cut the target price from HK$4.80 to HK$4.60 based on a dilutive share placing. 

Evergrande was allocated 123 billion shares in Mascotte Holdings, comprising 55 per cent of the latter’s enlarged share capital, at a 98 per cent discount in the deal that has seen Mascotte’s share price skyrocket today. Tencent has the other newly issued 20 per cent of Mascotte’s enlarged share capital. 

2:13pm: HSBC (yellow) and subsidiary Hang Seng Bank (purple) share prices went up after posting their results, while Bank of East Asia (green) remains flat. Share price as of 2pm and the percentage is computed from the market's open and not the previous close. Click to enlarge chart.

2:07pm: Shenzhen Composite Index stands at 2,029.48, down 3.84 per cent or 81.14 points. ChiNext slides 6.37 per cent, or 161.72 points, to 2,378.13.

2:05pm: Shanghai Composite Index sinks 2.361 per cent, or 86.50 points to 3,577.23. CSI300 Index falls 1.343 per cent, or 51.26 points to 3,765.44. 

2:04pm: Hang Seng Index drops 0.96 per cent, or 237.64 points, to 24,398.64. H-shares Index stands at 10,944.89, down 1.68 per cent, or 186.79 points. 

1:15pm: Four out of the top five most traded stocks in the stock exchange of Hong Kong went down this morning.The percentage is computed from the market's opening, not the previous close.

Ping An Insurance (yellow) down 3.7 per cent to HK$42.95. ICBC (purple) dropped 1.87 per cent to HK$5.24. Tencent (blue) shed 0.62 per cent to HK$143.8 while Bank of China (orange) fell 0.94 per cent to HK$4.2. Mascotte Holding (green) was the only gainer, rising 75.44 per cent to 50 HK cents. Click to enlarge.

1:10pm: Shenzhen Composite Index opens its afternoon session at 2,043.05, down 3.2 per cent or 67.58 points. ChiNext loses 5.39 per cent, or 136.80 points, to 2,403.04. 

1:09pm: Shanghai Composite Index slides 2.614 per cent, or 95.78 points to 3,567.95 at open of afternoon trade. CSI300 Index slips 1.568 per cent, or 58.83 points to 3,756.87.

1:09pm: Hang Seng Index goes down 0.82 per cent, or 203.0 points, to 24,433.27 at the open of afternoon trade. H-shares Index stands at 10,944.95, down 1.68 per cent, or 186.73 points.

Pre-tax profits at HSBC grew by about 10 per cent year on year to US$13.6 billion in the first half of 2015, coming in above expectations.

12:35pm: Performance of Hang Seng Index and Hang Seng China Enterprises Index. Click graph to enlarge.

 

12:34pm: In Hong Kong, the five biggest mover by turnover in the morning are Ping An Insurance, ICBC, Mascotte Holdings, Tencent and Bank of China. 

Brokers estimates the bank would report a net profit ranging from HK$17.57 billion to HK$19.87 billion. This compares to a net profit of HK$8.47 billion during the same period a year earlier.

12:08pm: The Hang Seng Index slides to 24,372.64, down 1.07 per cent or 263.64 points, as morning trading comes to a close. The H-share index stands at 10,942.23 having lost 1.7 per cent or 189.45 points.

11:47am: HSBC estimates about 15 per cent of stock pledges will face pressure to raise collateral as their share value has dropped more than 30 per cent from the time the stock pledge took place. 

11:43am: The Shanghai Composite Index drifts into the 3,500 zone, closing the morning on 3,574.8 points, down 2.43 per cent or 88.93 points. The CSI300 index declines to 3,763.42, down 1.4 per cent or 53.42 points. 

11:43am: The Shenzhen Composite Index doubles its losses in the last hour, sinking by 2.96 per cent or 62.47 points to 2,048.15. The ChiNext Price Index has plunged 5.26 per cent or 133.53 points to close the morning on 2,406.31.

11:43am: The Hang Seng Index sinks further to 24,391.60, down 0.99 per cent or 244.68 points. The H-share index drops to 10,938.14, a loss of 1.74 per cent or 193.54 points.

11:42am: Onshore spot yuan is trading at 6.2086 against the US dollar, stronger by 11 basis points from Friday's close. The offshore yuan stands at 6.2176, stronger by 26 basis points from the Friday finish.

11:37am: Internet payment service providers in Shenzhen slumped in morning trade after the central bank issued a consultation to tighten online payment rules. The picture shows intraday share price movements of Shenzhen Composite Index (purple) vs. Eastcompeace Technology Co. (green) vs. Shenzhen Xinguodu Technology Co Ltd (blue) vs. Shenzhen Zhengtong Electronics Co Ltd (yellow). Click to enlarge. 

11:27am: Mengniu Dairy is the biggest loser on the Hang Seng, dropping 7.27 per cent to HK$32.50 after Goldman Sachs downgraded the stock to ‘sell’ with target price cut to HK$30.10.

11:25am: Hong Kong dollar is trading Monday at 7.7517 to the US dollar, near upper end of the currency peg. Euro/dlr weaker by 0.01 per cent at 1.0983. Dlr/yen at 123.97, stronger by 0.06 per cent. Pound/dlr stronger by 0.02 per cent to 1.5625. Australian dollar to US dollar weaker by 0.07 per cent to 0.7303.  

11:18am: New York based investment bank Jefferies thinks Macau’s gaming market is over the worst and is recommending investors consider buying up relevant stocks. 

“Our channel checks suggest mass market is coming back. Our discussion with industry contacts suggest that the mass traffic is coming back to Macau, especially after the relaxation on transit visa since July 1. Premium mass is warming up, while VIP business is still challenging. Junket business remains weak due to crackdown on cross broader money transfer and lack of big players. On the other hand, casino operators are still disciplined in promotion despite of the weak market, which should help support their margins to some extent.”

The bank says there is no correlation between the 28 per cent drop in A-share valuations and revenues at the gaming tables. Gaming stocks improved 19.1 per cent on average in July and outperformed the Hang Seng Index, which fell 6.1 per cent. 

Jefferies says the outperformance was mainly driven by improved sentiment on the back of favourable Chinese travel/visa policies, a very low expectation on gaming revenues and earnings and depressed stock prices. 

The bank likes Galaxy, Sands China, SJM and Melco Crown.

11:12am: HSBC Chief China economist Qu Hongbing calls for stronger stimulus measures by Beijing in the second half of the year, adding that the final Caixin PMI reading shows weak recovery in spite of financial prosperity and a lackluster manufacturing sector, according to Qu’s micro blog. 

11:08am: Industrial and Commercial Bank of China and Ping An Insurance are trading top spot in the Hong Kong exchange turnover rankings. ICBC is currently number one, dropping 1.87 per cent to HK$5.24. 

Ping An has slid 3.36 per cent to HK$43.1 to extend its poor run for ten calendar days. It is also down 2.36 per cent to 32.58 yuan in Shanghai. 

Most of the heavily-traded stocks are down in Hong Kong this morning, with a few exceptions among the local property and banking blue chips.

10:37am: Green shoots might appear in China economy growth in September driven by recovering property sales amid faster inventory destocking process, Macquarie said in a note to clients. A useful indicator to watch is how cement prices would usually pick up in September historically.  

10:34am: The Shanghai Composite Index has chopped its way to 3,614.37 points, down 1.35 per cent or 49.36 points. The CSI300 index is at 3,789.55, a decline of 0.71 per cent or 27.02 points. 

10:34am: The Shenzhen Composite Index trails 1.44 per cent or 30.39 points in arrears at 2,080.23. The ChiNext Price Index slides further to 3.17 per cent or 80.4 points down.

10:33am: The Hang Seng Index stands at 24,452.65, down 0.74 per cent or 183.63 points. The H-share index has edged down to 10,993.47, off by 1.24 per cent or 138.21 points.

10:21am: The final PMI data for July came in worst than expected at 47.8 marking the sharpest contraction in manufacturing output in 44 months.  

“Data signalled that both domestic and foreign demand had softened in the latest survey period, as highlighted by new export work also falling in July after a slight pick up in June. 

Weaker market conditions and an associated downturn in client demand contributed to a third successive monthly contraction of manufacturing production in July. Moreover, the latest reduction in output was the sharpest seen in 44 months,” Markit wrote. 

Staff numbers at Chinese manufacturers declined for the 21st consecutive month in July, Markit found. Average selling prices also fell as factory managers cut charges due to increased competition for work. See chart below and click to enlarge.

10:19am: Mascotte Holdings has leapt 82 per cent to 52 HK cents on its resumption of trading. The manufacturing and investment group plans a capital reorganisation and the issue subscription shares amounting to 75 per cent of its enlarged issued share capital. 

Jewelry retailer Hong Kong Resources Holdings sinks 17 per cent to 14 HK cents on news that former chairman Kennedy Wong Ying-ho has resigned as of yesterday after being charged with a bribery offence by the ICAC.

10:00am: Mark Tinker, head of AXA Framlington Asia, part of AXA Investment Managers

“The reason, in my opinion, for further government intervention was the fact that the selloff on Monday appeared to follow a lot of social media chat that the government was no longer going to support the market.  Governments do it with FX all the time. If we look at the candle for Tuesday July 28 we see that the intraday low of 3550 was very close to the perceived ‘floor’ of 3500 where the government was widely believed to have intervened on 8th/9th July to stabilise markets. They probably did so again, negating the rumours and likely giving some shorts a headache. 

This point raises a more simple explanation in fact. If you believe that the floor is 3500 and the short term ceiling is 4500, where the brokers are ‘allowed‘ to sell their prop positions and interestingly enough very close to the 61.8 per cetn Fibonacci retracement, then if you get to 4140 on the Friday, you are closer to the top than the bottom, the odds say take profit as your upside is 360 points and your downside 640. Not rocket science, as they say. 

The big risk in my view has been that the noise from international pundits and speculators might derail or otherwise slow down the necessary financial sector reforms in China… The shift from production and export to consumption and import may not be happening fast enough for the high frequency data junkies, but it is certainly happening and this will continue to inform our judgement as to where the winners and losers ought to be found at the stock level.  Financial reform is needed in order to facilitate economic reform and, as far as we can tell from here in Hong Kong, the government remains committed to both.” 

See chart below and click to enlarge.

9:55am: Ten more accounts have been blocked from trading shares for three months by the Shanghai and Shenzhen stock exchanges last Saturday due to “irregular trading,” or “hedging” that are considered to have brought volatility to the market, according to websites of the two bourses. 

9:54am: Selling prevails in early Hong Kong trading: none of the 50 Hang Seng Index stocks and none of the 40 H-shares index stocks are trading positively. Petrochina is the biggest loser on both indices, dropping 3.51 per cent to HK$7.42.

9:54am: ING Morning Call:  

“The continued turnaround in the housing market is essential for hitting the 2015 7 per cent GDP growth target. We think panic selling in the stock market would be a threat to growth but a failure to rally wouldn’t be. That said, we remain of the view that China’s economic fundamentals and the outlook for financial policy are the most positive for equities in Asia." 

According to the Dutch bank, the stock market is not that important to China’s growth story as there are only 50 million retail investors in China (7 per cent of the urban population) and 70 per cent of them have less than 100,000 yuan in their stock accounts. 

9:50am: Calendar of data to be released this week.

9:47am: US hedge fund giant Citadel confirmed in a statement that one of the accounts managed by a Shanghai-based trading firm it co-owned was banned from buying shares by the China Securities and Regulatory Commission. Chinese securities regulators have been investigating so-called “malicious short selling” that is blamed for the prolonged market rout.   

9:45am: DBS report:

“On the broad US dollar trend, close attention will be paid to US data and com­modity prices this week. Last month, the Fed reaffirmed that it would still like to start the rate lift-off later this year, citing the improvement in the US labor market.

This brought the DXY (USD) index higher to 97.336 last week, near the top of its three-month range between 93.133 and 98.151. US dollar bulls are hoping for US non-farm payrolls out this Friday to beat the 225,000 consensus for July 15.

On the other hand, the US bond market is not convinced given the renewed fall in crude oil prices below $50 per barrel. The US 10-year bond yield fell for the first time in three months to 2.18 per cent in July from 2.3531 per cent in August.”

9:42am: The Shanghai Composite Index opens the week at 3,614.99 points, down 1.35 per cent. The CSI300 index of Shanghai-Shenzhen large-cap stocks also slid, opening 1.16 per cent down at 3,816.70. 

9:42am: The Shenzhen Composite Index opens at 2,079.13, down 1.49 per cent or 31.49 points. The emerging tech-focused ChiNext Price Index drops 2.54 per cent or 64.52 points to open at 2475.33.

9:41am: The Hang Seng Index opens at 24,533.14, down 0.42 per cent or 103.14 points. The China Enterprises Index (AKA the H-share index) drifted down to open at 11,073.52, off by 0.52 per cent or 58.16 points.

9:20am: The People’s Bank of China set the mid-price of onshore yuan trading at 6.1169, stronger by three basis points to the US dollar from the Friday mid-price fix.  

9:14am: Some updates on CSRC ‘s presser last Friday. 

“Irregular trading” and programme trading have left the market exposed to mounting risks and destablised market confidence, state-backed Shanghai Securities News reports Monday citing a China Securities Regulatory Commission official as saying. 

Shanghai and Shenzhen stock exchanges have restricted a total of 34 accounts from trading shares as regulators crack down on “coordinated stock dumping,” “selling-off of heavily-weighted stocks” as well as programme trading, the paper reports.  

9:13am: Trading volume of Shanghai A shares averaged 608 billion yuan a day last week, down 16 per cent from the previous week. The volume of northbound trades over Stock Connect averaged 3 billion yuan a day, up 19 per cent on the week.

Overall net buying of 1.9 billion yuan turned around the previous week’s net selling of 1.4 billion yuan. Trading volume on the Hong Kong main board averaged HK$95 billion, up 17 per cent on the previous week, marking  the first weekly gain in three weeks.

Southbound trading volume averaged HK$1.3 billion a day, up 17 per cent on a week ago. Net buying was HK$241 million, down sharply from HK$1.2 billion the previous week. Data courtesy of the team at Jefferies. 

9:11am: Barclays report:

“The HKMA’s June monetary statistics showed system loans rose 2.7 per cent month on month and trade finance rebounded by 5 per cent month on month, while system deposits were largely flat as growth in yuan deposits offset the decline in US dollar deposits.

Loans for use in Hong Kong rose by 2.5 per cent, loans for outside Hong Kong rose by 2.6 per cent and trade finance rebounded by 5 per cent month on month. We believe this was partially as a result of renewed confidence over China’s economy during the market rally in June.

Cheaper funding cost: Composite interest rate, which is a measure of the system funding costs declined by 2 basis points month on month to 29 basis points due to lower off shore yuan deposit funding cost and easier liquidity conditions, in our view.” 

9:05am: In pre-opening trading, the Shanghai Composite Index stands at 3,663.73 points, down 1.13 per cent or 42.04 points. The CSI300 index of Shanghai-Shenzhen large-cap stocks edges up 0.03 per cent or 1.29 points to 3,816.70.

9:02am: August futures contracts are trading at 24,505 points in Hong Kong, down 21 points or 0.09 per cent.

8:58am: HSBC and its subsidiary Hang Seng Bank, and Bank of East Asia will announce their results at lunch.

Bank of East Asia will have a briefing at 1:30 pm, with expectation that chairman David Li will be there.

Hang Seng Bank chief executive Rose Lee will talk to the press at 3 pm.

HSBC chairman Douglas Flint and chief executive Stuart Gulliver will have a telephone conference from London in the late afternoon

Share prices of Hang Seng bank (purple), HSBC (yellow) and Bank of East Asia (green) are seen in the chart below (click to enlarge), along with the Hang Seng Index (blue) over a the last three months.

 

8:55am: No Shanghai listed A-share company applied to resume trading or asked that their stock be suspended from trading on Monday. The number of suspended companies in Shanghai is 79, representing 7.28 per cent of the total.

In Shenzhen, a total of five listed companies say they will resume trading on Monday, while three firms will suspend trading in their shares. Some 321 firms in Shenzhen are in voluntary suspension, accounting for about 18.4 per cent of total listed companies. 

8:53am: Since Friday closing in Hong Kong, Mason Financial Holdings has announced it expects profits for the half to increase, while Golden Wheel Tiandi Holdings forecasts level profits. Profits will be down for HC International, China Silver Group and Ernest Borel Holdings. 

Losses are projected by a raft of companies: Asia Energy Logistics Group, Chu Kong Petroleum and Natural Gas Steel Pipe Holdings, China Glass, China Hanking, Tech Prop Technology Development, Art Textile Technology International, New Silkroad Culturaltainment and Daido Group.

8:40am: Sinopec Engineering and consortium partners from Spain and Korea have been awarded a contract for engineering, construction, pre-commissioning and startup assistance in respect of a new Kuwaiti oil refinery.

Estimated contract value is US$4.24 billion. Sinopec’s interest in the consortium is 40 per cent, amounting to around HK$13.15 billion of contract value.

8:24am: After Friday close, Swire Pacific announced it has entered into a framework agreement with Shanghai Newbund Industrial Development to jointly develop a retail project in Qiantan, Pudong New District with expected gross floor area of 124,000 square metres. Swire’s interest in the project will be 50 per cent. 

Swire also announced the sale of a residential property holding for HK$375 million to one of its independent non-executive directors.

7:53am: Societe Generale early call:

Various data in China are likely to be generally positive: industrial production and fixed asset investment are expected to pick up, exports and loan growth probably remained resilient, while retail sales might have softened due to the stock market sell-off. CPI in both China and Korea probably rebounded.