Mainland China stocks hammered lower following April trade data; Hong Kong stocks notch modest gain

Hang Seng Index kicks off the week with 0.3 per cent gain in Monday’s session

PUBLISHED : Monday, 09 May, 2016, 10:22am
UPDATED : Monday, 09 May, 2016, 6:28pm

Hong Kong stocks notched modest gains on Monday, while mainland Chinese shares thudded lower, extending last week’s losses as investors reduced risk exposure following April economic data released during the weekend that disappointed the market.

The Shanghai Composite Index fell 2.79 per cent or 81.14 points to end at 2,832.1, a two-month low. The CSI300, which tracks bigger-sized companies in Shanghai and Shenzhen, was down 2.07 per cent, or 64.73 points, at 3,065.62.

The Shenzhen Composite Index was 3.59 per cent lower at 1,804.34 and the Nasdaq style ChiNext fell 3.55 per cent to 2,053.60.

Among sectors, mining, telecommunication, steel and coal-related companies, ranked as the biggest decliners in Shanghai and Shenzhen. Shanghai-listed Huayu Mining and Rising Nonferrous Metals both dropped the daily 10 per cent limit.

“The weak trading data in April disappointed investors after improving significantly in March and they started to doubt whether the Chinese economy is in a recovery,” said Hanna Li Wai-han, a strategist at UOB Kay Hian (Hong Kong).

Hopes that Beijing would unveil fresh rounds of stimulus to help prop up the stock market were diminished somewhat after a gloomy economic story appeared the Communist Party’s People’s Daily on Monday. The report said the mainland economy is growing like an “L” shape, rather than a “V” or a “U” shape, and such adjustments could take more than two years. The report also quoted an unnamed “authoritative person” as saying high leverage was the “original sin” that leads to risks in stocks, bonds, bank credit, real estate and foreign-exchange markets.

The People’s Daily article may be sending a message that Beijing will try to avoid easing measures to stimulate growth, said Linus Yip, Hong Kong based chief strategist at First Shanghai Securities.

China’s exports contracted 1.8 per cent in April on year in US dollar terms, compared with 11.5 per cent growth in March, missing market expectations of flat growth during the month. Imports for the month were down 10.9 per cent on year, reflecting the 18th consecutive month of declines.

Hong Kong stocks rose slightly on Monday, but analysts said there are headwinds for the city’s equity market in the coming two months. The Hang Seng Index closed 0.3 per cent, or 60.21 points, higher at 20,170.08. The Hang Seng China Enterprises Index, which tracks mainland companies listed in Hong Kong erased its morning gains to end 0.21 per cent lower, shedding 17.4 points to 8,454.3.

Gains in Hong Kong were led by the property and banking sectors. Utilities, retailers and precious metals sector were the leading decliners. Wharf Holdings shares rose 3.08 per cent to HK$41.80 and Link Real Estate Investment Trust shares increased 2.06 per cent to HK$47.05.

“Market sentiment is still weak. The last time we saw a bull run it was driven by China’s trade data in March, but the latest data is not that encouraging,” said Yip from First Shanghai Securities.

Apart from domestic data, global risks will add up to headwinds for Hong Kong stocks in May and June, added Li.

“The possibility of the UK leaving the European Union in June will have a negative impact to Hong Kong stocks as the local equity market is sensitive to global risks,” said Li. “The Fed’s signals for increasing interest rates also puts pressure on the market. I expect Hong Kong stocks to decline in the coming two months.”

With additional reporting by Jennifer Li