Daily Report

China, Hong Kong stocks edge down as investors await US Fed, Bank of Japan decision

The benchmark Hang Seng Index closed lower this morning, the Shanghai Composite Index ended just higher.

PUBLISHED : Wednesday, 27 April, 2016, 11:03am
UPDATED : Wednesday, 27 April, 2016, 6:20pm

Stock markets in China and Hong Kong closed slightly lower on Wednesday, shrugging off China’s improved industrial profits for the first quarter, as investors stayed on the sidelines waiting for cues from the Thursday meetings of the central banks in Japan and the United States.

The Shanghai Composite Index slid 0.37 per cent, or 11.03 points, to 2,953.67. The CSI 300 Index tracking blue chips in Shanghai and Shenzhen fell 0.42 per cent, or 13.24 points, to 3,165.92. The Shenzhen Composite Index lost 0.29 per cent to 1,876.51 while the Nasdaq-style ChiNext Index was down 0.42 per cent at 2,146.61.

But total turnover in Shanghai and Shenzhen rose to 427.9 billion yuan (HK$511.64 billion), crossing the 400 billion yuan mark for the first time this week.

Hong Kong’s Hang Seng Index retreated from the gains made on Tuesday, closing down 0.21 per cent, or 45.7 points, to 21,361.60. The Hang Seng China Enterprises Index gained 0.24 per cent, or 21.4 points, to 9,037.48, with turnover sliding to HK$54.9 billion from HK$62.8 billion.

China’s total industrial profits for March rose 11.1 per cent year on year, showed data from the National Bureau of Statistics. That compares to the 4.8 per cent year increase for the first two months this year. For the first quarter as a whole, total industrial profits jumped 7.4 per cent year on year.

“It is worth noting that the recent improvement in industrial profits seems to be concentrated in a few industries,” JP Morgan said in a report. Sectors like computer, communication and other electronic equipment drove the growth while state-owned enterprises underperformed, with profits down 5.7 per cent.

“While we expect the impact of [China’s] recent policy support measures to continue feeding through to industrial activity in the coming months, it will be important to track if the recent moderate recovery in industrial sector’s revenue and profit performance will sustain and whether that may translate to some improvement in manufacturing fixed asset investment,” JP Morgan said.

Coal, steel and brokerage sectors saw shares fall in the mainland. China Shenhua’s A shares dropped 1.91 per cent in Shanghai to 14.41 yuan. Angang Steel and Baoshan Iron & Steel also fell.

Futures contracts of rebar, hot rolled coils and coking coal continued to fall, after China’s futures exchanges tightened trading rules to cool down the frenzied market.

In Hong Kong, coal, automobiles, hotels and entertainment stocks fell, while banking and basic materials surged.

Standard Chartered ended 5.56 per cent higher at HK$62.7, its highest since January 5, after posting improved pre-tax profits for the first quarter on Tuesday night. HSBC also rose 0.8 per cent to HK$52.65.

Most analysts believe that the US Federal Reserve is unlikely to raise interest rates in May, but expects it to provide clues on when it might do it.

Prashant Bhayani, Asia chief investment officer at BNP Paribas Wealth Management, said he expects the rate rise to come in September.

Kevin Leung, director of global investment strategy at Haitong International Securities, said investors may take profit gained in the past few weeks after the coming Fed statement, and the Hong Kong benchmark could drop to around 20,000 in May given that investors have failed to price in the possibility of a rate rise.