China stocks close flat to lower as stimulus hopes fade after upbeat Q3 GDP data

Hang Seng Index ends 0.4 pc lower, dragged down by China Life Insurance, which released its third profit warning of the year

PUBLISHED : Wednesday, 19 October, 2016, 9:03am
UPDATED : Wednesday, 19 October, 2016, 6:45pm

Chinese stock markets closed flat Wednesday, as expectations for monetary easing faded after data showed China’s economy grew as expected in the third quarter. Hong Kong shares were dragged lower largely by China Life Insurance, which warned in a statement that its net profit may have slumped 60 per cent in the third quarter due to investment losses.

Mainland China’s benchmark Shanghai Composite Index opened flat and moved in a 20-point band during the entire session. It ended up 0.84 points, or less than 0.1 per cent, at 3,084.72.

The large-cap CSI300 Index edged down 0.2 per cent or 5.09 points to 3,316.24. The Shenzhen Component Index dropped 0.4 per cent or 39.1 points to 10,757.92, while the Shenzhen Composite Index fell 0.1 per cent or 2.81 points to 2,053.79. The startup board ChiNext Index lost 0.6 per cent or 13.23 points to 2,184.91.

In the meantime, Hong Kong’s benchmark Hang Seng Index closed 0.4 per cent or 89.42 points lower at 23,304.97. The Hang Seng China Enterprises Index, known as the H-share index, finished down 0.8 per cent or 78.98 points at 9,641.22.

The market focus was on China’s third-quarter economic data, which came in roughly as expected.

The Chinese economy grew 6.7 per cent in the July-to-September period, unchanged from the previous two quarters, figures from the National Bureau of Statistics showed on Wednesday.

Fixed-asset investment also increased as expected for the first nine months, up 8.2 per cent from the same period last year. Industrial production rose 6.1 per cent year-on-year in September, and retail sales jumped 10.7 per cent in the same month.

“Overall, these data suggest that the economy has remained stable, so monetary policy is most likely to stay on hold for the rest of the year,” said Larry Hu, an analyst for Macquarie Research.

Goldman Sachs analysts also see “minimal likelihood of an interest rate cut”, but expect “high likelihood of further currency depreciation against the dollar”, assuming the broad US dollar remains strong. They predicted the Chinese economy will achieve 6.7 per cent growth for the fourth quarter and the whole year.

Zhao Wei, an analyst for Founder Securities, said stock market liquidity may remain tight in the near term, as the yuan faces considerable depreciation pressure and the Chinese central bank looks likely to rein in credit.

Looking ahead, Linus Yip, an analyst for First Shanghai Securities, said the next market focus may be the third and final US presidential debate, scheduled to take place at 9.00am local Hong Kong time, Thursday morning.

Among hot sectors, gold miners mostly advanced, as gold futures settled at their highest level in two weeks on Tuesday night after the US dollar retreated from recent highs. A weaker greenback tends to drive up the price of dollar-denominated gold.

Lingbao Gold surged 5.6 per cent to close at HK$1.9 in Hong Kong. Zhaojin Mining Industry Company gained 1.4 per cent to HK$7.5.

Zhongjin Gold also rose 0.2 per cent to 12.28 yuan in Shanghai.

China Life Insurance was the top loser among blue-chips in Hong Kong, tumbling 2.7 per cent to close at HK$20.15 in Hong Kong. Its A-shares in Shanghai dropped 1 per cent to 21.39 yuan.

The declines came after the company issued its third profit warning of the year, saying its third-quarter net profit may have slumped about 60 per cent year-on-year due to reduced investment income.

Hong Kong Exchanges and Clearing said in a statement after today’s close that trading in the securities and derivatives markets has not been affected by the Black Rainstorm Warning and would continue until the end of today’s last trading session. Hong Kong Observatory issued the warning at 4pm.

According to the rules, the night session in futures markets begins at 5.15pm and closes at 11.45pm.