Mainland stocks drop from three-month high as raw-material producers slide

Hong Kong stocks close almost unchanged as rally in tech companies offsets slump in Sunac China

PUBLISHED : Tuesday, 25 July, 2017, 9:16am
UPDATED : Tuesday, 25 July, 2017, 11:01pm

Chinese stocks fell from a three-month high, as Huaxin Cement and China Molybdenum led the decline on raw-material producers, the best-performing industry over the past two months.

The Shanghai Composite Index slid 0.2 per cent, or 6.91 points, to 3,243.69 at the close on Tuesday. Trading volumes on the measure were 10 per cent below the five-day average. The CSI 300 Index of large-cap shares lost 0.6 per cent and the ChiNext gauge of smaller firms added 0.1 per cent. Hong Kong stocks finished the day little changed.

Some investors started to take profits from a 19-per cent advancement on a gauge tracking material producers over the past two months, after government-led cutback in excessive capacity strains supply to push up prices of commodities from coal to cement and steel.

Companies including Huaxin Cement and Hesteel said earlier that first-half earnings might have surged, benefiting from increased product prices.

“The market is selling the outperformers for profit-taking,” said Wang Zheng, chief investment officer at Jingxi Investment Management in Shanghai. “As the index approaching the previous high, some investors are pulling out in case the market will alter the upward course.”

The Shanghai Composite is now only about 45 points, or 1.4 per cent, shy of 3,288.97, the highest level this year on a closing basis registered in April, as large companies rally on sign of a stabilisation in China’s economy. The benchmark has advanced 4.5 per cent this year.

A sub-index of raw-material producers on the CSI 300 declined 0.6 per cent on Tuesday. Huaxin Cement retreated 3.9 per cent to 12.45 yuan for the biggest drop since May 10. The loss pared the stock’s gain this year to 61 per cent. China Molybdenum, the producer of the metal used to make steel, lost 2.5 per cent to 7.04 yuan, trimming its gain in 2017 to 89 per cent. Henan Tongli Cement slumped 5.8 per cent to 19.95 yuan.

In Hong Kong, the Hang Seng Index swung between gains and losses for most of the day before closing almost unchanged at at 26,852.05. Gains in technology stocks countered a sharp decline in property developer Sunac China.

The Hang Seng China Enterprises Index, known as the H-share index, fell 0.4 per cent to 10,782.74.

Investors will also be closely watching a two-day Federal Reserve meeting, which is due to get underway later Tuesday in the US, for clues about when it will begin to unwind its quantitative easing.

Technology stocks trading in the city climbed on Tuesday, following cues from the Nasdaq Composite Index that closed at a record overnight.

AAC Technologies, which supplies acoustic components for Apple’s iPhones, rose 1.4 per cent to HK$106.50. Sunny Optical Technology, a manufacturer of optical instrument and lenses, climbed 2.5 per cent to HK$94.70.

Sunac China, controlled by magnate Sun Hongbin, tumbled 7.5 per cent to HK$18.60 after the developer said it would sell 220 million new shares for HK$4 billion (U$516 million) at an 8.8 per cent discount to the stock’s Monday closing price.

Sunac China was the most heavily-traded stock on the Hong Kong market on Tuesday, with shares worth HK$6.6 billion changing hands for the day.

The company’s latest stock-sale plan raised concern among investors that it may be overleveraged after agreeing last week to buy Dalian Wanda Group’s tourism projects for 43.8 billion yuan (US$6.49 billion). Sun previously acknowledged that banks were reviewing the company’s credit risks following the asset purchase plan.