China stocks slide to three-month low as big-caps sell-off resumes

Hang Seng Index pulls further away from recent highs, while concerns over regulatory tightening hurt Chinese markets

PUBLISHED : Monday, 27 November, 2017, 9:15am
UPDATED : Monday, 27 November, 2017, 10:49pm

China stocks dropped on Monday, sending the benchmark gauge to its lowest level in three months, as declines in big companies resumed amid a sell-off in the best-performing stocks this year.

The Shanghai Composite Index retreated 0.9 per cent, or 31.59 points, to 3,322.23 for the lowest close since August 24. The CSI 300 Index and the SSE 50 Index – both tracking large companies – slid 1.3 per cent and 0.7 per cent respectively. Hong Kong’s equity benchmark also retreated, with the Hang Seng Index consolidating around the 30,000-point level.

Combined turnovers on the Shanghai and Shenzhen exchanges fell to a one-month low of 426.7 billion yuan (US$64.6 billion).

A sell-off in Ping An Insurance Group and other large publicly-traded companies started last week after the state Xinhua News Agency singled out liquor giant Kweichow Moutai for its overly rapid share-price gain and financial regulators unveiled rules to put the nation’s US$15 trillion asset management industry under more scrutiny. Investors have been cashing out of the stocks with outsize gains this year, sending Ping An and Kweichow Moutai down more than 6 per cent from their record highs set this month.

“With regulators intent on deleveraging, this recent market collapse may be a sign of things to come,” said Stephen Innes, Asia-Pacific head of trading at Oanda. “As Beijing moves to standardise financial markets, it will likely lead to more short-term capitulations as investors are now required to face the inherent risk from high-yielding volatile assets as opposed to relatively risk-free returns as more financial reforms take hold.”

Among the top performers on the CSI 300 this year, Han’s Laser Technology slumped 2.1 per cent to 51.38 yuan, paring its gain to 127 per cent this year, and ZTE, China’s biggest listed maker of phone equipment, tumbled by the 10 per cent daily limit to 34.36 yuan as a third straight day of declines trimmed the stock’s annual advance to 115 per cent.

Ping An fell 1.4 per cent to 73.55 yuan while Gree Electric Appliances, the nation’s biggest air-conditioner manufacturer, dropped 3.2 per cent to 44.04 yuan. Both stocks have jumped at least 79 per cent this year.

With regulators intent on deleveraging, this recent market collapse may be a sign of things to come
Stephen Innes, Oanda

Traders were also waiting to gauge the strength of China’s economy as the statistics bureau kicks off the releases of economic data on November with the purchasing managers’ index of manufacturing industries on Thursday.

The PMI index probably dropped to 51.5 from 51.6 a month earlier, according to the median estimate of 26 economists polled by Bloomberg. Reading above 50 indicates expansion.

In Hong Kong, the Hang Seng Index dropped 0.6 per cent, or 180.13 points, to 29,686.19. The Hang Seng China Enterprises Index sank 1.1 per cent.

The Hang Seng Index closed above 30,000 for the first time in a decade on Wednesday before traders sold stocks to take short-term profits since then. The benchmark is now within 7 per cent shy of its all-time high registered in October 2007.

Financial stocks provided the biggest drag on the index today. Hong Kong Exchanges & Clearing fell 2.5 per cent to HK$240.80 and China Life Insurance slid 1.1 per cent to HK$26.60.