Hong Kong, Shanghai stocks retreat slightly after China’s data

The Hang Seng Index was down 0.14 per cent or 30.36 points to 21,297.88

PUBLISHED : Wednesday, 08 June, 2016, 9:25am
UPDATED : Wednesday, 08 June, 2016, 7:22pm

Hong Kong stocks narrowed early losses and closed slightly lower on Wednesday as investors shrugged off concerns about Chinese economic data, analysts said.

The Hang Seng Index edged down 0.14 per cent or by 30.36 points to 21,297.88. The Hang Seng China Enterprises Index moved up by 0.26 per cent or 23.52 points to 9,027.82.

Index heavyweight China Mobile fell 0.82 per cent in HK to HK$90.35 while Internet giant Tencent Holdings shed 0.4 per cent to HK$175.9. Energy shares firmed up after crude futures settled higher for a second straight day overnight. PetroChina climbed 2.3 per cent to HK$5.72, Sinopec by 2.5 per cent to HK$5.65, and Cnooc by 2.1 per cent to HK$9.77.

The Ministry of Commerce said on Wednesday that China’s imports in May slipped 0.4 per cent in dollar terms. That was the smallest drop since 2014 and much better than the expected 6.8 per cent decline. China’s exports in May declined by 4.1 per cent, on par with the expectation of a 4.1 per cent drop.

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Hanna Li Wai-han, a strategist at UOB Kay Hian (Hong Kong) said the better-than-expected imports signal improvement in China’s domestic demand and recovery of the economy. However, Li said she did not expect a sustained rally in Hong Kong stocks.

“The good news for Hong Kong stocks has already been reflected in their recent rallies,” said Li. “The possible launch of Shenzhen Hong Kong Stock Connect and MSCI’s decision on A-shares’ inclusion may fail to lift Hong Kong stocks much higher.” The city’s benchmark Hang Seng index may find it difficult to reach 21,600 points this month, she added. Hong Kong stocks jumped to the highest level on Tuesday since May at 21,328.41.

On the contrary, Li warned, investors should pay more attention to the negative news to Hong Kong stocks including the risk of UK exiting the European Union.

Hong Kong stocks are expected to retreat heavily if UK leaves the EU, Li warned adding that other European nations such as Netherlands may follow suit, causing more pressure to the global economy.

On the mainland, the Shanghai Composite Index fell 0.3 per cent to 2,927.16. The CSI300 was off 0.4 per cent at 3,163.99. The Shenzhen Composite Index lost 0.33 per cent or 6.26 points to 1,918.62 The Nasdaq-style ChiNext Index declined 0.46 per cent or 10.18 points to 2,186.54.

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Julian Evans-Pritchard, China economist for Capital Economics said growth in China’s exports is likely to remain subdued, as there is no sign of a significant pick-up in global growth. China’s exports in May declined 4.1 per cent, more than double the 1.8 per cent decrease in April.

Nevertheless, China’s May imports improved more than anticipated, as recovering commodity prices and relatively resilient domestic demand are driving a recovery.

“Import growth is likely to edge up for the remainder of this year, as the fall in commodity prices during the second half of 2015 enters the base for comparison, and the continued feed-through from earlier policy easing helps to prop up domestic demand,” Evans-Pritchard said. “We expect it [import growth] to return to positive territory before long. “

Late Tuesday, official statistics showed China’s foreign exchange reserves declined by US$28 billion in May to US$3.19 trillion, the lowest level in more than four years.

“The confidence-sensitive capital left China in May,” said Prakash Sakpal, an analyst for ING Group, noting that the PBOC’s recent weakening of the yuan has stoked worries on the currency’s depreciation, while investors are also haunted by hard-landing fears after China’s state media said the government will shift to supply-side structural reforms from demand-side stimulus.

The Hong Kong stock market will be closed on Thursday for a public holiday. The mainland share markets will shut for a holiday long weekend from the close of trading on Wednesday and reopen for regular trading on Monday.

Additional reporting by Laura He