China stocks fall for second day as slowdown worries haunt market
Mainland Chinese stocks fell for a second straight day on Wednesday after recent data suggested the Chinese economy is losing momentum as the effect of policy easing begins to fade.
The Shanghai Composite Index struggled to keep its head above water for most of the day, before dropping 0.3 per cent, or 8.37 points, to close at 3,135.35.
On Tuesday, the index ended 0.3 per cent lower. In April, it lost 2.1 per cent, the worst monthly decline this year.
“Chinese stocks are consolidating after PMI data suggests risk to growth activities in the second quarter and given that regulations remain tight,” Jimmy Zhu, chief strategist at Fullerton Markets said.
On Tuesday, the April Caixin Manufacturing Purchasing Managing Index, a privately-conducted gauge of China’s manufacturing sector, came in at a worse-than-expected 50.3, down from 51.7 in March. It was also the lowest level in seven months.
Over the weekend, China’s official April PMI came in at a six-month low of 51.2.
“Our China Activity Proxy has been pointing to slower growth in recent months, after peaking in December. But the PMI readings for April appear to confirm this downward trend and suggest that the slowdown has extended into the second quarter,” said Julian Evans-Pritchard, China Economist for Capital Economics, in a recent research note.
In addition, the crackdown by regulators to reduce financial leverage continued to weigh on investors’ sentiment.
“China has seen a recent wave of financial regulation tightening that has triggered tighter interbank liquidity, unwinding of inter-FI investment positions, and visible financial market jitters,” said Ning Zhang, an economist for UBS Securities.
Among other stock indices on Wednesday, the large-cap CSI300 fell 0.4 per cent to 3,413.13. The Shenzhen Composite Index and the start-up board ChiNext index lost 0.3 per cent and 0.6 per cent respectively, finishing at 1,901.75 and 1,840.45.
Combined daily turnover for Shanghai and Shenzhen markets amounted to 431.3 billion yuan (US$62.5 billion), slightly up from Tuesday’s 401.5 billion yuan.
Property developers were mostly weak. China World Trade Center lost 2.3 per cent to 20.3 yuan, Nanjing Gaoke fell 1.2 per cent to 15.38 yuan, and Zhejiang Guangsha dropped 0.5 per cent to 5.54 yuan.
Investors were also looking towards the US for clues on interest rates, with the Federal Reserve’s policy board set to conclude its two-day policy meeting for May later in the US business day on Wednesday.
The Fed is expected to hold interest rates steady while offering guidance on a possible increase in June.
All three major US indices closed up on Tuesday with the Dow Jones industrial Average finishing 0.2 per cent higher at 20,949.89 and the S&P 500 tacking on 0.1 per cent to 2,391.17. Meanwhile, the Nasdaq Composite was up 0.1 per cent to 6,095.37.
Hong Kong’s financial markets are closed for a public holiday on Wednesday.