Mainland Chinese stocks cap worst week since May as Brexit concerns linger

PUBLISHED : Friday, 17 June, 2016, 9:18am
UPDATED : Friday, 17 June, 2016, 8:32pm

Mainland Chinese stocks closed slightly higher on Friday, but still booked their biggest weekly drop since mid-May as fears lingered over a potential market turmoil if Britain votes to leave the European Union next week.

The Shanghai Composite Index ended Friday higher by 0.4 per cent or 12.29 points at 2,885.1. However, it declined 1.4 per cent for the week, marking the second consecutive week of loss.

“Risk aversion will continue to grow as we head into the Brexit vote. Hong Kong and mainland Chinese markets may be volatile next week,” said analysts from Hong Kong-based Bright Smart Securities in a note on Friday.

In Hong Kong, the benchmark Hang Seng Index closed up 0.7 per cent or 131.56 points at 20,169.98. For the week, it sank 4.1 per cent, the biggest decline since early May.

Major central banks have recently expressed concerns about the implication of the Brexit vote, including renewed market volatility and impact on the British economy and its monetary policy stance.

On Friday, risk sentiment slightly shifted after campaign activities were suspended following the shooting death on Thursday of Jo Cox, a pro-EU British lawmaker. However, analysts said risks were still out there.

“For the moment, it is still a tight race between the two camps, with the ‘Leave’ group gaining the upper hand recently,” said Bernard Aw, an analyst for IG Group. “This uncertainty is what keeps investors awake at night, at least until the vote takes place.”

Among other major indices, Hong Kong’s H-share index gained 0.9 per cent or 76.06 points to 8,485.87. On the mainland, the large-cap CSI 300 Index rose 0.5 per cent or 15.68 points to 3,110.36. The Shenzhen Composite Index added 0.8 per cent or 15.3 points to 1,900.74. The Nasdaq-style ChiNext Index finished up 1 per cent or 21.47 points at 2,122.89.

Earlier this week, Hong Kong and mainland Chinese stocks declined heavily after Beijing released worse-than-expected investment data, stirring up concerns about the health of the economy. On Wednesday, global stock index compiler MSCI said it would delay the inclusion of A shares in its benchmark index, given concerns about the market accessibility.

“Those factors may continue to affect sentiment in the A-share markets in the near term,” said analysts from Bright Smart.

Combined turnover for Shanghai and Shenzhen reached 571 billion yuan on Friday, lower than Thursday’s 594 billion yuan. Turnover for Hong Kong markets was almost unchanged at HK$63 billion.

Coal miners and brokerage firms were among the best performers, with Datong Coal Industry rallying 8.5 per cent to 5.09 yuan, China Coal Energy jumping 3.2 per cent to 4.82 yuan, First Capital Securities climbing 3 per cent to 38.68 yuan and Shanxi Securities up 2.4 per cent to 15.24 yuan.

In Hong Kong, banking giants HSBC Holdings rebounded 2.8 per cent to HK$47.70 and Standard Chartered gained 3.8 per cent to HK$57.05.

Additional reporting by Enoch Yiu and Vivian Lin