Mainland China markets rise for second day in a row as Hong Kong falters

Mainland China stocks outpaced their Hong Kong counterparts on Wednesday, reversing morning losses to rise for the second day in a row on the back of a stable yuan.

Despite dipping slightly in the morning session, the Shanghai and Shenzhen markets gained more than 1 per cent by the close of business while Hong Kong slumped for the second day in a row.

That came as crude oil prices retreated on Tuesday after disappointment that an agreement between Russia and Saudi Arabia to cap oil production did not include other major producers such as Iraq and Iran, leading PetroChina, Sinopec and CNOOC to all close lower on Wednesday.

The Shanghai Composite Index closed 1.08 per cent higher at 2,867.34, while the blue-chip CSI 300 Index closed up 0.87 per cent on the back of positive growth in industrial stocks.

The Shenzhen Composite Index rose 1.42 per cent to 1,847.65 on positive growth in information technology stocks.

VC Brokerage director Louis Tse Ming-kwong said a slightly weaker but stable yuan, also known as the renminbi, had kept market sentiment strong on Wednesday.

“That’s the most important thing because all these regional markets and countries want to export to China,” he said. “If the renminbi keeps doing down like that it means they’ll be a lot more competitive.”

On Tuesday, mainland Chinese markets surged to a three-week high after Premier Li Keqiang pledged to take action to prop up the economy if momentum slowed to an unreasonable speed.

Guangdong Alpha Animation and Culture was among the Shenzhen stocks which performed strongly on Wednesday, rising by 6.47 per cent to 36.05 yuan.

Shenzhen-listed Zoomlion’s restatement of its intent to buy US crane manufacturer Terex was well-received by the market, with its share price rising by 1.15 per cent to 4.41 yuan.

In Hong Kong, the Hang Seng Index dipped in the afternoon to close down 0.96 per cent at 18,938.03.

The Hang Seng China Enterprises Index also slumped after a strong opening, to fall 0.97 per cent to 7,950.31.

“Sentiment is turning better and we will see the Hong Kong market rebound further in the short term,” said Kevin Leung, the director of global investment strategy at Haitong International Securities. “However, right now we are still in a bearish scenario and volatility in the A-share market, oil price, and the China and US currencies still weigh on the Hong Kong market.”

Tse said turnover was still weak in Hong Kong and its inability to break far above the 19,200 mark was proof of this.

“At this level, they become very cautious and adopt a wait-and-see attitude ... if you look at the property market in Hong Kong there’s still room to go down,” he said.

On the energy markets, crude oil prices ended lower on Tuesday, giving back some recent gains. West Texas Intermediate crude for March delivery fell 40 US cents, or 1.4 per cent, to settle at US$29.04 a barrel, after trading as high as US$31.53 a barrel in electronic trading.

A weak oil price led PetroChina’s Hong Kong-listed price to drop 3.02 per cent on Wednesday, closing at HK$4.82, while CNOOC fell even further, down 4.07 per cent at HK$7.78.

The Japanese and South Korean markets performed weakly on Wednesday, closing slightly down on the previous day.

Japan’s Nikkei 225 Index fell by 1.36 per cent to close at 15,836.36 while Korea’s KOSPI dropped 0.23 per cent to 1,883.94.