China stock market

China’s stocks fall for second day weighed down by weaker growth in second quarter

Investors seek for clues from quarterly economic indicators of the initial economic impact from trade war and ongoing financial deleveraging

PUBLISHED : Monday, 16 July, 2018, 5:35pm
UPDATED : Monday, 16 July, 2018, 5:37pm

China’s stocks dropped for a second day as weaker economic growth data in the second quarter released on Monday clouded investors’ sentiment.

The Shanghai Composite Index dropped 0.6 per cent on Monday, extending a 0.2 per cent decline for the previous trading day. Hong Kong’s Hang Seng Index finished almost unchanged. Smartphone maker Xiaomi slumped in the city after the mainland’s bourses barred Chinese investors from trading the stock through the exchange link programmes.

Traders sought for clues in the economic indicators from China’s statistics bureau of the impact on China’s economic health from the trade war with the US and ongoing financial deleveraging. Economic expansion slowed to 6.7 per cent in the second quarter from 6.8 per cent for the previous three-month period, according to the statistics bureau. While retail sales grew at a faster pace in June, growth in industrial output and fixed-asset investment both weakened.

“Key second-quarter economic data were mostly in line with market’s expectations,” said Wu Kan, a fund manager at Shanshan Finance in Shanghai. “But the market is forward-looking and the biggest concern about investors is that data will be looking ugly for the rest of the year. The risk hasn’t been removed now.”

The Shanghai Composite fell 17.14 points to 2,814.04 at the close, taking its loss this year to 15 per cent as the worst performer among the world’s major benchmarks. The CSI 300 Index of large-caps also dropped 0.6 per cent and the ChiNext gauge of smaller companies slipped 0.1 per cent.

But the market is forward-looking and the biggest concern about investors is that data will be looking ugly for the rest of the year
Wu Kan, Shanshan Finance

Banks and property developers paced the decline among the mainland’s equities as their profitability is closely correlated to the economic cycles. China Construction Bank dropped 2.6 per cent to 6.80 yuan and Industrial and Commercial Bank of China lost 2.4 per cent to 5.23 yuan.

Poly Real Estate Group shed 2.4 per cent to 10.90 yuan after saying in a preliminary earnings statement that first-half profit increased 14.9 per cent from a year earlier. China Fortune Land Development sank 4 per cent to 25.57 yuan.

Movie studios dropped after the State Taxation Administration said late Friday that the industry’s workers should pay taxes in compliance with the laws and any violation would be severely punished. Beijing Enlight Media tumbled 6.8 per cent to 9.55 yuan, the biggest decline in a month, while Zhejiang Talent Television & Film slumped 3.4 per cent to 12.47 yuan.

BYD, China’s biggest maker of electric cars, lost 4.4 per cent to 43.95 yuan after saying it had reported a case of an impostor employee who forged and signed contracts to the police.

Leshi Internet Information & Technology dropped 2.3 per cent to 3.43 yuan after the troubled video-streaming operator said first-half loss would probably widen to 1.11 billion yuan (US$165.9 million) from 636.8 million yuan a year earlier on increasing costs and cash crunch.

Vatti, a maker of kitchen appliances, jumped 4 per cent to 15.18 yuan. The company will start to refund customers for certain products sold over the past month in a marketing campaign, living up to its part of the bargain should France win the Fifa World Cup champion.

In Hong Kong, the Hang Seng Index added 0.1 per cent, or 14.22 points, to 28,539.66. The Hang Seng China Enterprises Index, or the H-share gauge, dropped 0.4 per cent.

Xiaomi shed 1.9 per cent to HK$21.05 at the close after paring an intraday loss of as much as 9.6 per cent. The Shanghai and Shenzhen exchanges made surprise announcements over the weekend that foreign companies, stapled securities and stocks with weighted-voting rights in Hong Kong will be omitted from the list of stocks that mainland investors can trade via the connect schemes. The bourses cited the lack of understanding of these companies among local investors.