Chinese Stocks Fall in Hong Kong to Lowest Level Since September

  • Industrial shares pace losses after producer prices retreat
  • Technical indicators show H shares approach oversold levels

Chinese stocks fell for a fifth day in Hong Kong after data showed producer prices extended declines and the central bank cut the yuan’s reference rate to the weakest level in four years.

The Hang Seng China Enterprises Index slid 1.1 percent to 9,558.76 at the close, the lowest since September. Industrial and power companies led declines. China’s factory-gate prices dropped for the 45th straight month, reflecting weaker demand for industrial goods and commodities. The yuan slipped to the lowest level against the dollar since August 2011. The Shanghai Composite Index rose 0.1 percent at the close.

“The Hong Kong market is more influenced by outside investors,” who have a more cautious outlook for 2016, said Yen Chiu, a trader at Shenwan Hongyuan Group Co. in Hong Kong. “There are ups and downs in the broader market amid thinning volume as most investors prepare to close their books for the year end. Sentiment isn’t bright.”

The H-shares gauge has dropped 20 percent this year, heading for the worst annual decline since 2011, amid concern a deepening economic slowdown will hurt earnings growth. Data this month has showed China’s exports falling for a fifth month, while manufacturing conditions weakened to the lowest level in more than three years. The gauge’s relative-strength index approached 30, a signal to some traders that selling is overdone.

Inflation Data

The producer-price index fell 5.9 percent in November from a year earlier, the National Bureau of Statistics said Wednesday, versus a projected 6 percent drop. The consumer-price index rose 1.5 percent in November from a year earlier, compared with the 1.4 percent median estimate in a Bloomberg survey and 1.3 percent in October.

In Hong Kong, China Longyuan Power Group Corp. tumbled 6.5 percent, while Air China Ltd. slid 3.8 percent.

The yuan weakened 0.1 percent to 6.4245 per dollar. The People’s Bank of China reduced the onshore yuan’s daily reference rate after data this week showed bigger-than-estimated declines in exports and foreign-exchange reserves.

IPOs Surge

Hong Kong’s Hang Seng Index slipped 0.3 percent. The CSI 300 Index gained 0.4 percent, led by financial and consumer-discretionary companies. Trading volumes in Hong Kong and Shanghai were at least 20 percent below the 30-day average for this time day.

China Vanke Co., which announced on Tuesday that Anbang Insurance Group had boosted its stake in the biggest-listed Chinese developer, jumped by the 10 percent daily limit. China plans to encourage small and mid-sized cities to offer rural residents subsidies and tax cuts to buy first homes in urban areas as part of measures to trim unsold inventories, according to people familiar with the matter.

Chongqing Changan Automobile Co. paced gains for consumer shares, increasing 6.1 percent. China plans to introduce a round of subsidies for auto purchases by rural residents that will cover passenger vehicles with engines smaller than 1.6 liters, according to people who asked not to be named because they were discussing information that’s private.

All six companies making their debut in mainland China surged by the daily limit of 44 percent. Anji Foodstuff Co., Banbao Co., Bomin Electronic Co. began trading in Shanghai, while Beijing Sanfo Outdoor Products Co., Hubei Kailong Chemical Group Co., Zhejiang Zhongjian Technology Co. started trading in Shenzhen.

Nearly every time a new batch of companies took orders over the past year, money-market rates climbed and the Shanghai Composite slumped as investors hoarded cash for their bids. A valuation cap has led to nearly guaranteed gains once new shares start trading, spurring investors to place bids worth hundreds of billions of dollars during each round of new listings.

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