Chinese stocks trading in Hong Kong fell for the first time in nine days after the benchmark gauge’s rally sent valuations to the highest level since 2011.
China Merchants Bank Co. and New China Life Insurance Co. tumbled at least 6 percent. Tencent Holdings Ltd. sank the most in a year after its chairman cut his stake in the company. Hainan Airlines Co. jumped by the 10 percent daily limit in Shanghai on a plan to sell new shares in a placement.
Hong Kong’s Hang Seng China Enterprises Index slid 2.2 percent to 14,264.81 at the close, the biggest loss since Jan. 19. Its 14-day relative strength index was above 70 Tuesday for a sixth straight day. Levels above 70 signal to some traders that gains have gone too far, too fast.
“The market is building up pressure for profit-taking in the short term as share prices have gone too fast in recent days,” Dai Ming, a fund manager at Hengsheng Asset Management Co., said in Shanghai. “The fund flow from the mainland to Hong Kong could slow a bit.”
The Shanghai Composite Index added 0.3 percent to a seven-year high of 4,135.57 at the close, while the CSI 300 Index advanced 0.4 percent. The Hang Seng Index lost 1.6 percent. The Shanghai index’s RSI was above 70 Monday for the 19th straight day, while the Hang Seng measure’s RSI rose to 89.4, the highest since February 1989.
U.S. investors are missing out on the biggest stock rally in the world. As the H-shares gauge climbed 22 percent this year, traders were caught off guard, pulling about $100 million from the largest China exchange-traded fund in the U.S. over the span, according to data compiled by Bloomberg. Even with the withdrawals, assets in the fund have surged to more than $7 billion as Hong Kong’s H-share market soared.
The H-share rally “has absolutely caught people by surprise,” Michael Shaoul, who helps oversee $10 billion as chief executive officer of Marketfield Asset Management in New York, said by e-mail on Monday. “A closing of the gap seemed increasingly likely to take place. But most people thought it would come about via a collapse of the A-share market.”
China Merchants Bank slumped 6.1 percent in Hong Kong, while New China Life dropped 6.8 percent. Citic Securities Co. plunged 4.6 percent. Tencent slid 5.5 percent. Chairman Ma Huateng cut his stake in the company to 9.65 percent from 9.86 percent and raised a combined HK$3.22 billion ($415 million), according to filings to the Hong Kong stock exchange Monday.
Thirty companies start selling initial public offering shares this week. They may freeze 2.73 trillion yuan ($439.2 billion) tied up to new share subscriptions, according to the median estimate of six brokerages surveyed by Bloomberg.
The Shanghai Composite has jumped 75 percent in the past six months, the most among 92 benchmark indexes globally, on speculation weak economic data will spur the government to take measures to bolster growth.
Data Monday showed overseas shipments fell 14.6 percent in March, while imports slumped. Gross domestic product data scheduled for Wednesday will probably show the economy expanded 7 percent in the first quarter from a year earlier, according to a separate survey. That would be the slowest pace since the first quarter of 2009, when China was hit by the global financial crisis.
New yuan loans were 1.18 trillion yuan in March, the central bank said after the market close. That compared with the median estimate of 1.04 trillion yuan in a Bloomberg survey.
Gauges of industrial and utility stocks in the CSI 300 rose at least 3.3 percent for the steepest gains among 10 industry groups. Huaneng Power International Inc. and GD Power Development Co. jumped 10 percent, leading the advance among electricity producers.
Hainan Airlines rose to the highest close since December 2010. The carrier said it will raise as much as 24 billion yuan from the stock sales and use the proceeds to introduce 37 aircraft, buy a stake in Tianjin Airlines and repay bank loans. China Railway Group Ltd. surged 10 percent in Shanghai as rail stocks rallied after the 21st Century Business Herald reported the Asian country will invest 2.8 trillion yuan in rail over the next five years.
The People’s Bank of China may release March data on money supply as early as today. New yuan loans may have been 1.04 trillion yuan in March, according to the median estimate of 37 economists surveyed, compared with February’s 1.02 trillion yuan. M2 money supply may have risen 12.4 percent from a year earlier, the survey showed.
Margin traders increased holdings of shares purchased with borrowed money on Monday, with the outstanding balance of margin debt on the Shanghai Stock Exchange rising by 1.7 percent to a record 1.11 trillion yuan.
— With assistance by Shidong Zhang