China Stocks Cap Weekly Decline as Investor Interest Dwindles

  • Data on industrial production, fixed asset invesment tomorrow
  • Chinese shares in Hong Kong poised for biggest gain in a week

China’s stocks capped a weekly loss as suspected state intervention failed to revive confidence among investors in the world’s worst-performing equity market.

The Shanghai Composite Index edged up 0.2 percent on Friday, paring this week’s loss to 2.2 percent, amid turnover that was 36 percent below the average. Investors are awaiting this weekend data that is projected to show no let-up in the slowdown in industrial production and fixed-asset investment. The yuan strengthened in onshore trading after the central bank raised its daily reference rate by the most since November. The Hang Seng China Enterprises Index rose for the first time in four days.

Trading on the world’s second-largest stock market has tumbled to the lowest level since 2014 as margin traders unwind bullish positions in the face of suspected buying by state-directed funds. China’s benchmark gauge has lost 21 percent this year, the most among 93 global benchmark indexes tracked by Bloomberg, as worsening economic data and meddling by the government deter investors.

"Fundamentals are not improving," said Steven Leung, a Hong Kong-based executive director for institutional sales at UOB Kay Hian. "Most people are staying on the sidelines," watching for any policy statements from ongoing government meetings, he said.

Trading Wanes

The Shanghai Composite halted a two-day losing streak as material companies rebounded. Combined turnover on the Shanghai and Shenzhen stock exchanges has fallen about 74 percent from last year’s peak, based on the 30-day average. Margin traders have cut holdings of shares purchased with borrowed money to the lowest level since December 2014.

During a majority of days this month, the Shanghai index has recorded intraday losses before recovering to end the trading session higher, with suspected intervention targets including Industrial & Commercial Bank of China Ltd. and PetroChina Co. leading the rebound. Some local branches of the securities regulator asked listed companies, mutual funds and brokerages to stabilize the market during annual parliamentary meetings this month, two people with direct knowledge of the situation said last week.

Economic Data

Industrial production probably expanded 5.6 percent in the January-February period from a year earlier, according to economists’ projections. That would be the weakest start to the year since 2009, and comes after data Tuesday showed a worse-than estimated plunges in exports. The figures, due Saturday, combine January and February to smooth out distortions arising from the weeklong lunar new year holiday.

The CSI 300 Index climbed 0.2 percent as gains for metal producers overshadowed losses for industrial shares. Jiangxi Copper Co. advanced 3.5 percent, while Aluminum Corp. of China gained 1.8 percent. China Cosco Holdings Co. and China International Marine Containers Group Co. both slid more than 1.5 percent. 

Coal producers were the worst performers this week. Shaanxi Coal Industry Co. slumped 12 percent, while Yanzhou Coal Mining Co. lost 6.6 percent.

In Hong Kong, the Hang Seng China index climbed 1.7 percent, led by railway companies. The Hang Seng Index advanced for the first time in five days, adding 1.1 percent.

Trainmakers Jump

CRRC Corp. surged 10 percent in Hong Kong after the Chicago Transport Authority said on Thursday it awarded a $1.3 billion rail cars contract for the city’s "L" urban rail system to a unit. China Railway Group Ltd. climbed 5.3 percent.

Railway stocks will benefit as Chinese spending increases this year, China International Capital Corp. analysts led by Mingbing Liao wrote in a note. State-run China National Transportation Equipment & Engineering Co. is close to finalizing an agreement on a $3 billion rail project to connect Tehran with Mashhad city, Reuters reported, citing an unidentified Chinese person.

The Chinese currency strengthened as much as 0.32 percent to 6.4866 a dollar, the highest level this year. The People’s Bank of China raised its fixing, which restricts onshore moves to 2 percent on either side, by 0.34 percent to 6.4905.

The magnitude of the fixing move surprised Australia & New Zealand Banking Group Ltd., with senior currency strategist Khoon Goh putting it down largely to a euro rally and dollar decline overnight. The European currency jumped the most since Feb. 3 after central bank President Mario Draghi said he didn’t see any need to cut interest rates further, while a gauge of dollar strength fell 0.54 percent.

“Maybe the PBOC is trying to preempt weak economic data that’s coming out over the weekend,” said Andy Ji, a Singapore-based foreign-exchange strategist at Commonwealth Bank of Australia.

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