Chinese stocks retreat from key 3,000 level as early rally in 5G sector gives way to sell-off in hemp, insurance companies
- The Shanghai Composite Index lost 0.9 per cent to 2,994.94, having held above the 3,000 threshold until the last 30 minutes of trading
Chinese stocks retreated again from a key level on Thursday as an early rally in stocks linked to 5G mobile technology gave way to a sharp sell-off in industrial hemp-related companies and insurers that had reported disappointing results.
The Shanghai Composite Index lost 0.9 per cent to 2,994.94, having held above the 3,000 threshold until the last 30 minutes of trading. The large-cap CSI 300 Index was down 0.4 per cent, and the Nasdaq-style Chinext Index shed 0.7 per cent.
In Hong Kong, the Hang Seng Index inched up by 0.2 per cent, as properties gained on rebounding home prices.
Traders were weighing how much momentum is still left in the Shanghai benchmark after stocks took off in late February, boosted by index compiler MSCI’s decision to increase the weighting of China shares in its global indices, and Beijing’s fiscal stimulus package.
The benchmark has hovered around the 3,000 level since then, unmoved by Chinese premier Li Keqiang’s vows to further open up to foreign businesses and fulfil promises of a large-scale tax and fee cut in his speech delivered at the Boao Forum in the southern island of Hainan.
Meanwhile, China’s commerce ministry spokesman said on Thursday a lot of ground still needs to be covered in talks between American and Chinese negotiators, who will work throughout the evening and Friday in Beijing before vice-premier Liu He heads to Washington next week.
ZTE Corp, China’s second-largest telecom equipment maker, led a surge in 5G stocks – those related to the next generation of mobile communication networks – in early trading. The company soared by the daily limit of 10 per cent in Shenzhen and jumped 9.4 per cent in Hong Kong, after it projected a net profit of between 800 million yuan and 1.2 billion yuan in the first quarter on Wednesday.
The guidance came in much higher than expected and signalled the company had fully recovered from the damaging effects of US sanctions last year and would enter a new phase of profit growth, according to a report by analysts at Sinolink Securities.
A gauge tracking 116 stocks related to 5G technology listed in Shanghai and Shenzhen rose as much as 4 per cent before paring the gains to 0.6 per cent later in the day.
Downward forces caught up with hemp-related stocks, which have been on a frenetic rally over the past two months as investors anticipated local governments relaxing controls over the cultivation of the material.
The Shenzhen Stock Exchange issued letters to four companies on Thursday to ask for clarification on risks and regulatory issues.
In its latest letter to the Hunan Er-Kang Pharmaceutical, the stock exchange asked if the company intended to inflate its stock price by announcing today it had agreed to buy a stake in a hemp-growing company.
Adding to the selling forces, insurer China Life dropped 2.3 per cent in Shanghai after reporting a 65 per cent decline in 2018 net profit on Wednesday evening.
The losses were a result of the wider slump in the market last year, the company said in its annual report, while its investments in stocks and funds generated poor returns.
In Hong Kong, Chinese vaccination developer CanSino Biologics surged 58 per cent to HK$34.7 from its initial public offering price of HK$22 on its trading debut.
The biotech company has yet to record any revenue since its foundation in 2009. It has 15 vaccines in the pipeline covering diseases including the Ebola virus.
Shares of virtual bank licence winner ZhongAn Online P&C Insurance jumped 7.8 per cent.
The company’s 51-per cent owned ZhongAn Virtual Finance was one of the first three virtual banks to receive licences from the Hong Kong Monetary Authority on Wednesday after market close.
