Daily Report

Mainland shares flat, despite tepid PMI reading

For the week, the CSI300 gained 2.5 per cent, while the SSEC rose 2.7 per cent.

PUBLISHED : Friday, 01 July, 2016, 8:44am
UPDATED : Friday, 01 July, 2016, 7:17pm

China A-shares edged higher on Friday, the first trading day of the second half the year, despite signs of a slowdown in manufacturing activity, while Hong Kong’s market remained closed for a public holiday.

The Shanghai Composite Index closed 0.1 per cent or 2.87 points higher at 2,932.48.

The CSI 300 – which tracks large caps listed in Shanghai and Shenzhen – closed flat at 3,154.20.

The Shenzhen Composite Index lost 0.18 per cent or 3.52 points to 1,970.72 while the Nasdaq style ChiNext shed 0.75 per cent or 16.61 points to 2,211.18.

Mining, banking and construction sectors led the gains, offset by a decrease in the education and internet sectors.

Hong Kong’s stock market was closed Friday for the July 1 public holiday to mark establishment day of the Hong Kong Special Administrative Region.

China’s official manufacturing purchasing managers’ index (PMI) for June came in at 50, compared with a reading of 51 a month earlier, according to the National Bureau of Statistics. It just missed market expectations of 50.1.

The country’s manufacturing PMI has been standing above 50 for four months in a row. Levels below 50 represent a contraction in activity.

The non-manufacturing PMI for June was 53.7, compared with 53.1 a month earlier.

“China’s PMI for June suggested that industrial activities have started to lose momentum...China is unlikely to achieve an economic growth of 6.7 per cent in the second quarter,” ANZ Research analysts Raymond Yeung and David Qu wrote in a note.

“We believe that the government will stimulate the economy by hastening infrastructure investment and urbanisation. The central bank may also cut interest rates or the reserve requirement ratio very cautiously to boost business confidence,” the analysts said.

China is unlikely to achieve an economic growth of 6.7 per cent in the second quarter
ANZ Research analysts Raymond Yeung and David Qu

The Caixin manufacturing PMI for June, which tracks small and mid-size enterprises, fell to 48.6, missing market expectations of 49.2. The non-official manufacturing PMI has been sliding for three months and has been below 50 for 16 months.

Meanwhile, market watchers are waiting to see whether mainland regulators will announce a launch date for the long-awaited Shenzhen-Hong Kong Stock Connect scheme.

However, Liu shiyu chairman of the China Securities Regulatory Commission, told Hong Kong Commercial Daily on Friday the date has not been decided yet because some technical problems remained, but that the new link will be launched this year.

Asian stocks all closed higher on the first trading day of second half of 2016.

Japan’s Nikkei225 rose 0.68 per cent or 106.56 points to 15,682.48 . South Korea’s market rose 0.86 per cent or 16.97 to 1,987.32, and the All Ordinaries in Sydney gained 0.31 per cent to 5,327.0. For the week, the CSI300 gained 2.5 per cent, while the SSEC rose 2.7 per cent.

Most Asian stocks market performed poorly in the first half of this year, however.

Shanghai composite plunged 17.2 per cent in the period, Japan’s Nikkei225 lost 18.2 per cent, while US stocks rose 2.9 per cent.

Jing Ulrich, Asia-Pacific managing director and vice-chairman at J.P. Morgan, said Hong Kong and China stocks expect to remain stable in the second half, without any major volatility.

Overnight, stock markets in the United States and Europe rose for three days in a row, amid expectations that central banks will launch more monetary stimulus to maintain economic growth in the post-Brexit world.

The Dow Jones Industrial Average Index rose 1.33 per cent or 235.31 points to close at 17,929.99, while the S&P 500 closed 1.36 per cent higher at 2,098.86, and Nasdaq increased 1.33 per cent to close at 4,842.67.

S&P downgraded the credit rating of the European Union to AA from AA+ on concerns over weaker budget flexibility after Britain’s vote to leave EU, but it said the outlook of the EU is stable provided no more member countries leave the union.

European markets are all trading higher on Friday..

London’s FTSE100 increased 0.32 per cent higher to trade at 6,524.83 while Germany’s DAX was up 0.16 per cent to 9,695.27. The CAC in France rose 0.09 per cent to 4,238.0 on Friday afternoon.

Hong Kong stocks’ American Depository Receipts (ADRs) rose in the US market after the Hong Kong market closed on Thursday.

After conversion into Hong Kong dollars, HSBC ADRs closed at HK$48.73, up 2.84 per cent from Hong Kong Thursday close. China Life ADRs closed at HK$16.75, up 0.76 per cent, while China Mobile ADRs closed at HK$90.12 after rising 1.63 per cent.