China shares edged lower in volatile trade on Thursday, limiting gains in Hong Kong markets as sentiment remained fragile despite signs that a cash crunch in the banking sector was easing.
Chinese markets surrendered early gains with the key benchmark index slipping to end at fresh four-and-a-half year lows as investors opted to take profits after recent gains.
The Shanghai Composite Index ended down 0.1 per cent at 1,950.01 points, its lowest close since January 2009, while the CSI300 of the leading Shanghai and Shenzhen A-share listings dropped 0.4 per cent, hovering around its lowest since December 2012. Shanghai’s turnover was some 41 per cent above its 20-day moving average.
The Hang Seng Index ended well off the day’s highs, but was still up 0.5 per cent at 20,440.08, its highest close in a week. The China Enterprises Index of the top Chinese listings in Hong Kong finished down 0.1 per cent. Hong Kong’s turnover was at its lowest in a week, but still slightly above its 20-day moving average.
“The money is not so willing to chase the highs. The market sentiment is still weak,” said Linus Yip, a strategist with First Shanghai Securities in Hong Kong.
“After the short-covering is over, we will have some pullback,” he said.
China cash rates eased for a fifth day on Thursday as the panic of a possible credit crunch that gripped the market last week subsided, but traders said money market rates remain elevated and liquidity is tighter than normal.
Chinese markets regained some stability after the central bank earlier this week moved to quell concerns by saying it had provided funds to some institutions and will do so again if there is a need.
Yet, it remained committed to cracking down on risky informal lending, pointing to tougher conditions for the banking sector ahead and possibly slower economic growth.
In Hong Kong, Industrial and Commercial Bank of China (ICBC) gained 1.3 percent and China Construction Bank (CCB) fell 0.4 per cent, while in Shanghai ICBC rose 1.9 per cent and CCB 1.8 per cent.
The president of CCB, the country’s No 2 lender, said on Thursday it had not stopped issuing new loans amid a tightening of credit in the country that has sparked reports some banks may be reining in lending.
China regulators have also quickened approvals for quota applications under the renminbi qualified foreign institutional investor (RQFII) scheme, allowing more foreign investors to use offshore yuan to buy mainland securities, according to media reports.
Traders said “window dressing” buying by fund managers to improve the appearance of a portfolio ahead of the half-year also gave markets a boost, with retailers particularly strong after the recent sell-off.
Shares of jewellery retailer Chow Tai Fook Jewellery surged 4.9 per cent on Thursday, after the stock plunged to a record low on Tuesday.
Shares of China’s largest footwear retailer Belle International rebounded 4.6 per cent, after hitting its lowest since June 2010 earlier this week.
In China, Anhui Conch rose 2.1 per cent after plunging 16.9 per cent since mid-June, while China State Construction rose 2.3 percent after a 12.7 percent decline in the past six sessions.
“It’s just bargain-hunting. There are still lots of uncertainties ahead,” said Ben Kwong, KSI Asia’s chief operating officer in Hong Kong. “The market will still have quite of lot of volatility in the third quarter,” he said.