- Hang Seng China Enterprises Index rebounds from six-year low
- Yuan heads for steepest advance since 2005 in Shanghai
China’s stocks fell as trading resumed after a week-long holiday, while shares of the nation’s companies rallied in Hong Kong. The yuan surged the most since at least 2005.
The Shanghai Composite Index dropped 0.6 percent to 2,746.20 at the close, as losses for financial and industrial companies overshadowed a rally for gold miners. The Hang Seng China Enterprises Index jumped from a six-year low. The yuan gained 1.2 percent in Shanghai after the dollar slumped last week and the central bank chief voiced support for the currency. The nation’s exports declined in January for a seventh month.
The Shanghai Composite has plunged 22 percent this year, the world’s worst performer after Greek equities, on concern that the economic slowdown and weakening yuan will exacerbate capital outflows. The Hang Seng China gauge traded at 5.8 times reported earnings last week, the cheapest since at least 2001, after the index tumbled 6.8 percent in two days.
Chinese investors “looked to global markets last week which were highly volatile,” said Ronald Wan, chief executive officer at Partners Capital International Ltd. in Hong Kong. Losses are “not too drastic. The Shanghai index may have some support around 2,500,” he said.
The MSCI All-Country World Index tumbled 2.6 percent last week, entering a bear market for the first time in more than four years, amid concern over the health of the world economy. Mainland markets were closed during the entire five-day period, while Hong Kong’s markets traded on Thursday and Friday.
The Shanghai index slumped as much as 3 percent on Monday before paring losses in the afternoon, while the CSI 300 Index ended down 0.6 percent after sliding 2.6 percent earlier. The Hang Seng China Enterprises rallied 4.8 percent for its biggest gain in five months. The Hang Seng Index added 3.3 percent, led by casino shares and Chinese insurers.
The yuan advanced the most since the nation scrapped a peg to the dollar in July 2005, to 6.4954 a dollar. The offshore yuan traded in Hong Kong rose 0.1 percent.
The People’s Bank of China has stepped up efforts to restore stability to the nation’s currency and economy, with Governor Zhou Xiaochuan breaking his long silence to say there’s no basis for continued yuan depreciation. The nation’s balance of payments is good, capital outflows are normal and the exchange rate is basically stable against a basket of currencies, Zhou said in an interview published Saturday in Caixin magazine.
A gauge of industrial companies declined 0.7 percent, led by transportation companies. China Cosco Holdings Co. slumped 2.4 percent, while China Shipping Container Lines Co. slid 2.8 percent.
The drop in overseas shipments compared with a 2.3 percent increase in December, while imports extended a stretch of declines to 15 months, falling 14.4 percent. The decrease suggests the yuan’s depreciation since August has yet to result in a sustained boost to the competitiveness of China’s factories. The government is targeting the economy to expand in the range of 6.5 percent to 7 percent for this year, after recording 6.9 percent growth in 2015 that was the slowest in 25 years.
Zhongjin Gold Corp. and Shandong Gold Mining Co. soared by the daily limit of 10 percent. Bullion has been the best performer on the Bloomberg Commodity Index this year as a weakening global economy, the spread of negative interest rates and prospects for a weaker yuan spurred demand.
In Hong Kong, HSBC Holdings Plc climbed 4.5 percent after saying it will keep its headquarters in London. Great Wall Motor Co. and Ping An Insurance Group Co. surged more than 6 percent.
While the rout in overseas shares last week may help Communist Party officials counter perceptions that China is the biggest risk for global markets, investors will find little to cheer about among mainland-traded stocks. Valuations in the $5.3 trillion market, already inflated by a record-breaking bubble last year, now look even more expensive versus their beaten-down global peers.
The Shanghai Composite trades at a 34 percent premium to MSCI Inc.’s emerging-markets index -- up from an average gap of 10 percent over the past five years -- and equities in the tech-heavy Shenzhen market are almost four times more expensive than their developing-nation counterparts. Shares with dual listings, meanwhile, were valued at a 46 percent premium before trading resumed today.
Margin debt in China’s stock market has shrunk to the lowest level since December 2014, a sign of waning investor confidence. The outstanding balance of margin debt on the Shanghai and Shenzhen stock exchanges dropped to 888.4 billion yuan on Feb. 5.
— With assistance by Kana Nishizawa, and Fox Hu