Chinese stocks edge up but banks weigh down Hong Kong market

Chinese stocks posted small gains on Thursday but Hong Kong’s benchmark index saw small losses, dragged down by poor results of major banks.

Shanghai Composite Index closed 0.11 per cent, or 23.27 points, higher at 3,003.92. Shenzhen Composite Index added 0.29 per cent, or 5.44 points, to 1,912.21 while the Nasdaq-style ChiNext Index lost 0.47 per cent, or 10.50 points, to 2,238.29.

Hong Hao, chief strategist at Bocom International, said the positive sentiment backing a rebound in Chinese markets is “far from over”.

“Risk-averse sentiments prevailed in January and February as people were concerned over oil, commodities, and US Fed’s stance on interest rate hikes. All these concerns have now eased,” he said, adding the Chinese economy is also expected to see some improvement following substantial credit growth in the past few months.

“It is very likely that China’s PMI (purchasing managers’ index) will come in above 50 tomorrow, indicating some improvement in the manufacturing sector.”

In Hong Kong, the Hang Seng Index gave up earlier gains and slipped 0.13 per cent, or 26.69 points, to 20,776.60 by close. The Hang Seng China Enterprises index edged up 0.27 per cent to 9,003.25.

In Hong Kong, three of the four big state-owned Chinese banks – Industrial and Commercial Bank of China (ICBC), China Construction Bank(CCB) and Bank of China retreated after announcing their annual results on Wednesday.

The Agricultural Bank of China (ABC) was the last one among the ‘big four’ to announce results. On Thursday it reported a 0.62 per cent growth in net profit, after the stock market closed in Hong Kong. ABC shares shed 0.71 per cent to HK$2.79 in the day’s trading.

Analysts at Hong Kong’s Chief Securities said the major banks’ results have cast a shadow on the profitability of China’s banking sector and bad loan risks amid a slowing economy.

“The slight gains in net profit were mainly due to a rapid increase in bad loans,” they said in a research report on Thursday.

Both ICBC and CCB, in particular, reported a more than 50 per cent year-on-year jump in asset impairment losses, Chief Securities pointed out. Consequently, the banks have all lowered their payout ratios by 8 to 9 per cent.

Shares of ICBC fell 1.1 per cent to HK$4.33, after posting a 0.5 per cent gain in annual net profit and a higher non-performing loan ratio of 1.5 per cent in 2015. Bank of China dropped 0.6 per cent to HK$3.23. Its non-performing loan ratio increased for a fourth straight year in 2015 to 1.43 per cent, while net profit increased 0.7 per cent year-on-year.

Agricultural Bank of China was flat at HK$2.81 ahead of its earnings report due later in the day.

Outside of banking, Dalian Wanda Commercial Properties, the property unit of the Dalian Wanda conglomerate owned by tycoon Wang Jianlin, surged 18 per cent to HK$45.8, after it said its parent is considering a plan to privatise the company.

Wanda Hotel Development also soared 8.9 per cent to HK$0.86 in Hong Kong.

On the mainland, shares of China Construction Bank fell 0.8 per cent to 4.86 yuan, Agricultural Bank of China lost 0.6 per cent to 3.18 yuan, and ICBC was off 0.5 per cent to 4.3 yuan. Bank of China traded unchanged at 3.4 yuan.