China’s tech start-up index hits two-year low while Shanghai sees worst close in 7 months

Xiongan-related stocks plummet in Shenzhen while Chinese insurers and banks outperform in Hong Kong

PUBLISHED : Wednesday, 10 May, 2017, 9:10am
UPDATED : Wednesday, 10 May, 2017, 10:48pm

Chinese tech start-up stocks slid to their worst levels in more than two years on Wednesday while the benchmark Shanghai Composite Index retreated to a seven-month low as fears of an escalating crackdown on financial leverage continued to dampen investors’ risk appetite, especially for speculative plays.

The Shenzhen-based ChiNext Price Index, China’s equivalent of the Nasdaq stock exchange for new technology companies, initially rose in the morning, but then gave up all its gains and slid 1.7 per cent, or 31.17 points, to close at 1,771.32, the lowest level since February 2015.

The benchmark Shanghai Composite Index, which is dominated by state-owned enterprises such as banks and energy firms, also wiped out early gains in the afternoon to end 0.9 per cent lower at 3,052.78, the worst close since October last year.

The Shanghai Composite has fallen in six of the past seven sessions.

Combined turnover for Shanghai and Shenzhen markets increased 16 per cent to 402.4 billion yuan (US$58.3 billion).

“Since the start of May, A shares have continued falling and repeatedly hit new lows. The risk sentiment is very weak,” said Su Peihai, an analyst for Guangzheng Hang Seng Securities.

“The authorities have intensified their clampdown on stock manipulation and stepped up scrutiny on the financial industry, which is stirring up the markets. Unless they ease the crackdown or roll out any supportive policies, I don’t see a big chance for the index to stage a significant rebound.”

Xiongan-related stocks, many of which are smaller companies listed in Shenzhen, plummetted in the afternoon. Xiongan is a new economic zone that Beijing hopes to build in Hebei province, modelled on the Shenzhen Special Economic Zone and the Shanghai Pudong New Area.

Shenzhen-listed Shanghai Hanbell Precise Machinery, China Zhonghua Geotechnical Engineering Group, and Beijing Jiayu Door Window and Curtain Wall JSC all sank by their allowable drop limit of 10 per cent, closing at 17.83 yuan, 12.29 yuan, and 8.92 yuan separately.

The authorities have intensified their clampdown on stock manipulation and stepped up scrutiny on the financial industry, which is stirring up the markets
Su Peihai, an analyst for Guangzheng Hang Seng Securities

Nonetheless, financial stocks bucked the trend and headed higher. Shanghai-traded Ping An Insurance climbed 5 per cent to 39.9 yuan while New China Life Insurance gained 3.8 per cent to 48.76 yuan.

In Hong Kong, the Hang Seng Index followed regional markets to close higher, up 0.5 per cent, or 126.39 points to 25,015.42.

“The Hang Seng Index is gradually breaking above the key 25,000 resistance level following strong US and European markets,” said Ben Kwong Man-bun, director of KGI Asia.

The Hang Seng China Enterprises Index, known as the H-shares index, gained 1 per cent, or 98.43 points, to 10,227.42. Daily turnover for Hong Kong stocks rose more than 30 per cent to HK$94 billion.

Chinese insurers and banks outperformed. Ping An Insurance shares in Hong Kong jumped 3.8 per cent to HK$45.5, the biggest gainer among blue chips. China Life Insurance advanced 2.1 per cent to HK$24.15.

Bank of China and ICBC rose 1.3 per cent and 1.2 per cent respectively, closing at HK$3.79 and HK$5.1.

Tencent Holdings briefly hit a new record of HK$255.4 intraday, before erasing gains and slipping 0.2 per cent to HK$250.4 at close.

Elsewhere in Asia-Pacific on Wednesday, Japan’s Nikkei Average ended up 0.3 per cent at 19,900.09 and Australia’s S&P/ASX 200 finished 0.6 per cent higher at 5,875.4.

US stocks traded near record highs overnight on Tuesday.

The Dow Jones Industrial Average finished 0.2 per cent lower at 20,975.78, the S&P 500 eased 0.1 per cent to 2,396.92 after hitting an intra-day peak, while the Nasdaq Composite rose 0.3 per cent to 6,120.59.