Mainland China stocks see slight rebound amid low turnover

Hong Kong market was closed on Tuesday due to typhoon

PUBLISHED : Tuesday, 02 August, 2016, 9:53am
UPDATED : Tuesday, 02 August, 2016, 5:29pm

Mainland China’s stock market saw trading turnover narrow to one of the lowest levels in two months on Tuesday, although the benchmarks rebounded slightly amid lukewarm investor interest due to the lack of further monetary easing, a slew of big initial public offerings and worries over tightened rules for wealth management products.

Hong Kong’s market was closed all day Tuesday due to Typhoon Nida. Share trading is expected to resume on Wednesday.

The Shanghai Composite Index ended 0.61 per cent or 17.89 points higher at 2,971.28, while the CSI 300, which tracks blue chips in Shanghai and Shenzhen, rose 0.39 per cent or 12.24 points to 3,189.05.

The Shenzhen Composite Index gained 0.73 per cent to 1,926.69 and the Nasdaq-style ChiNext shed 0.67 per cent to 2,113.21.

Trading turnover in Shanghai narrowed to only 129.3 billion yuan (HK$150.9 billion), one of the lowest levels since the beginning of June.

Most sectors saw a small rebound, led by public transportation and logistics firms. Banking, liquor and tourism stocks fell.

Analysts said mainland markets were overdue for a technical rebound following recent declines that saw the Shanghai Composite Index shed 1.1 per cent last week, while ChiNext gave up 5.7 per cent.

But the declining trading turnover signalled that the rebound was likely to be short lived, Huatai Securities’ strategists said in a note.

The lack of any clear official signal on China’s monetary policy is the fundamental reason that hindered the market
Li Lifeng, Sinolink Securities

In a further sign of waning investor confidence, margin lending in Shanghai and Shenzhen fell for the fourth straight day on Monday, dropping by 12.48 billion yuan during the period to 860.1 billion yuan.

“The lack of any clear official signal on China’s monetary policy is the fundamental reason that hindered the market [from rising],” Shanghai-based Sinolink Securities analyst Li Lifeng said in a note.

The stock market was dominated by capital from short-term investors for the time being, leading to recent volatility, Li said, adding that most investors might prefer a wait-and-see strategy before more news from the central bank.

A government clamp down on wealth management products was still a factor weighing on the market, according to a note by Huatai Securities.

Last week, it was reported that China’s banking regulator was planning tighter regulations on commercial banks’ wealth management products, a move expected to divert capital away from China’s stock market.

Brokers also believe that big initial public offerings this week would draw investors away from trading currently listed stocks, as IPOs on the mainland almost always generate sharp gains for subscribers after the trading debut.

Nine companies will kick off share sales in the mainland this week, a number rarely seen since Chinese regulators allowed the resumption of IPOs in November last year after the 2015 summer stock market rout. The new listings include Bank of Guiyang, the second largest IPO in Shanghai this year, with a fundraising target of 4.1 billion yuan.