Property developers slammed, helping drag Hong Kong’s H-share index into bear territory
Shanghai’s stock sell-off continued on Wednesday, while a gauge of Chinese companies trading in Hong Kong also slipped into bear territory, as the potential for a trade war between China and the US and the prospect of slowing growth dampened investors’ confidence.
The Shanghai Composite Index fell 1.1 per cent for a third day of declines, adding to a 20 per cent drop from a January high that is defined as entering a bear market. The Hang Seng China Enterprises Index, or the H-share gauge, slid 2.2 per cent, bringing its slide from a January peak to 21 per cent.
The currency also weakened, with the yuan breaching the 6.60 against the US dollar, its lowest level in six months. Tightened liquidity because of deleveraging also added to pessimism about the growth outlook of the world’s second-largest economy.
“There’s a lack of confidence in the market and investors are very downbeat about the economic outlook, with the uncertainty of the trade war hanging there,” said Wu Kan, a fund manager at Shanshan Finance in Shanghai. “The market hasn’t found its bottom yet.”
The Shanghai Composite sank 31.33 points to 2,813.18 on Wednesday. The gauge is now valued at 13.7 times earnings, close to the level touched in the aftermath of a 2015 crash that wiped out US$5 trillion in market value, according to Bloomberg.
Consumer stocks were the focus of selling on Wednesday, as investors began to cash out of stocks that had been most resistant to the market shake-out. A measure tracking consumer staples stocks sank 4.5 per cent for the steepest decline among industry groups. Shede Spirits slumped 7.7 per cent to 37.30 yuan, paring its gain to 38 per cent over the past year. Wuliangye Yibin tumbled 6.1 per cent to 76.55 yuan and Kweichow Moutai lost 4.3 per cent to 722.44 yuan.
China Merchants Shekou Industrial Zone Holdings led the drop among property developers after the nation’s three policy banks reportedly tightened approvals of new loans for shanty town redevelopment projects. The shares slid 6.2 per cent to 18.92 yuan. China Vanke lost 5.2 per cent to 24.22 yuan and Poly Real Estate Group retreated 4.5 per cent to 11.92 yuan.
Air China fell 4.1 per cent to 8.93 yuan for a sixth straight day of declines on concern rising oil prices and a weakening yuan will eat into profits. Major rival China Southern Airlines lost 3.6 per cent to 8.46 yuan.
Geeya Technology plunged 9.9 per cent to 2.83 yuan after the Shenzhen exchange said it has started delisting procedures against the company that had been found by the regulator to have inflated sales and profits data in its initial public offering.
In Hong Kong, the Hang Seng Index shed 1.8 per cent, or 525.14 points, to 28,356.26. Chinese developers were the worst performers on the benchmark. China Evergrande Group declined 7.4 per cent to HK$19.30. Sunac China Holdings dropped 8.7 per cent to HK$25.30 and Country Garden Holdings slid 7.4 per cent to HK$12.74.
AAC Technologies Holdings, which derives almost two thirds of its sales from the US, plunged 7.3 per cent to HK$101.50.