China stocks record first monthly loss in 2019, as foreign capital heads for exit
- The Shanghai Composite Index closed 0.5 per cent higher at 3,078.34
- The Hang Seng Index dropped 0.7 per cent to 29,699.11
China stocks rose on Tuesday despite disappointing April manufacturing activity data, with pork producers leading the advance.
The Shanghai Composite Index closed 0.5 per cent higher at 3,078.34, bringing the month’s loss to 0.4 per cent. This is the benchmark’s first losing month in 2019, on the back of a world-beating 24 per cent gain over the first quarter.
The Shenzhen Component Index and the ChiNext Index both gained 0.5 per cent.
Northbound capital trading the China markets through the Connect cross-border investment channel recorded a net outflow of 18 billion yuan (US$2.7 billion) in April, the biggest monthly outflow since July 2015 in the aftermath of China’s stock market crash.
Turnover in Shanghai and Shenzhen totalled 497 billion yuan, thinning from the 646 billion yuan on Monday. Markets in the mainland are closed for a public holiday for the remainder of this week and will reopen on Monday.
The gains came after China’s official manufacturing purchasing managers’ index (PMI) recorded a surprise fall in April, suggesting that factory activity remained weak and the government may need to strengthen its stimulus policies to stabilise a slowing economy.
The official PMI declined to 50.1 in April from 50.5 in March, below the market expectations of 50.5, according to a Bloomberg poll. The Caixin manufacturing PMI, a private gauge compiled independently, also fell to 50.2 from 50.8 for the previous month, lower than the consensus forecast of 50.9.
“The weak economic data led to higher hopes that the Chinese government will continue stimulating the economy with supportive policies,” said Kenny Tang Sing-hing, chief executive of China Hong Kong Capital Asset.
Tang said the market has been in consolidation since the beginning of April as investors turned cautious amid a flood of company first-quarter earnings announcements. The market is likely to continue consolidating until the US and China reaches a final resolution to the year-long trade war, he added.
Pork related companies led the advance on hopes that rising pork prices will lead to better company earnings.
A gauge tracking 27 pork producers listed in China rose 5 per cent, according to data provider Shanghai Wind. Liaoning Wellhope Agri-tech, Tangrenshen Group and New Hope Liuhe jumped by the daily limit of 10 per cent.
The African Swine Fever epidemic spreading in China will push pork prices to a peak in a year, analysts led by Wang Zhe at Central China Securities, a Chinese brokerage, wrote in a report on Wednesday.
The 23 pork related stocks in the A-share market are likely to rise to a high point in the fourth quarter, based on analysis of previous cycles, according to Wang.
Home appliance giant Gree Electric declined 3.8 per cent, after reporting a mere 1.6 per cent rise in first-quarter net profit from last year. Deutsche Bank downgraded the firm to hold from buy on Wednesday, a day after Citi cut its recommendation for the stock to sell from buy.
In Hong Kong, the Hang Seng Index dropped 0.7 per cent to 29,699.11.
The mainland markets will be shut from Wednesday to Friday for a public holiday, while the Hong Kong market will be closed on Wednesday and resume trading on Thursday.
