China stock market

Chinese stocks gain for 5th day as tech-heavy ChiNext jumps the most in four months

Shanghai Composite rises 0.7 per cent, while Hang Seng retreats on signs of stocks being overbought

PUBLISHED : Tuesday, 16 May, 2017, 9:05am
UPDATED : Tuesday, 16 May, 2017, 10:34pm

Chinese stocks rose for a fifth day on Tuesday, driven by a surge in the ChiNext index of small-caps which made its biggest gain since January 17.

Meanwhile, Hong Kong’s equity market fell from its highest close since July 2015.

The Shanghai Composite Index reversed earlier losses to advance 0.7 per cent, or 22.73 points, to 3,112.96 at the close. The ChiNext climbed 2.0 per cent to 1,814.94 as it continued to rebound after hitting its lowest level since the 2015 stock crash last week.

For Hong Kong, the market is still in an upward trend but it will suffer from profit taking from time to time before setting a new high
Wei Wei, trader, Huaxi Securities

“China stocks continue to rebound, driven by small-caps which had previously dropped too rapidly,” said Wu Kan, a fund manager at Shanshan Finance in Shanghai. “There’s still room for the Shanghai Composite to rise to about 3,150.”

Investors bought consumer stocks on optimism their earnings will weather the clean-up of the financial sector. Liquor giant Kweichow Moutai rose 2.5 per cent to a record close of 430.19 yuan. Wuliangye Yibin gained 5.4 per cent to 47.60 yuan.

However, Xinjiang Tianshan Cement fell lower as investors offloaded stocks following the conclusion of the two-day “Belt and Road Initiative” summit in Beijing. The stock tumbled 1.3 per cent to 14.08 yuan.

In Hong Kong, the Hang Seng Index dropped 0.1 per cent, or 35.65 points, from its highest close since July 2015 to close at 25,335.94. The Hang Seng China Enterprises Index of Chinese companies trading in the city slipped 0.2 per cent, or 16.66 points, to 10,433.69.

Mining shares were the biggest decliners on Tuesday. Yanzhou coal dropped 1.0 per cent to HK$5.81 and Shougang Resources slid 1.5 per cent to HK$1.31.

The weakness in Hong Kong markets bucked the overnight strength of US stocks, although the city’s shares have so far been immune to Chinese policy makers’ crackdown on financial leverage.

“For Hong Kong, the market is still in an upward trend but it will suffer from profit taking from time to time before setting a new high,”said Wei Wei, a trader at Huaxi Securities.

The Hang Seng Index has gained 15 per cent so far this year, compared with a 0.8 per cent decline on the Shanghai Composite. Even so, stocks in the former British colony are still 16 per cent cheaper than mainland equities, according to a measure tracking the price difference between the two markets.

The S&P 500 Index and the Nasdaq Composite Index both added 0.5 per cent to reach new records on Monday, and the Dow Jones Industrial Average advanced 0.4 per cent.

Crude oil futures climbed more than 2 per cent after Saudi Arabia and Russia favoured extending a production-cut deal for longer-than-expected, by another nine months.

Other Asian markets mostly gained with Japan’s Nikkei 225 adding 0.3 per cent and South Korea’s Kospi up 0.2 per cent.