Chinese Stocks in Hong Kong Resume Losses as Financials Decline

  • Investors concerned little policy support ahead, Pang says
  • Trading volume remains light in Shanghai, Hong Kong markets

Chinese stocks in Hong Kong resumed declines as financial companies slumped amid speculation the central government will refrain from adding stimulus even as the economy slows.

The Hang Seng China Enterprises Index slid 0.5 percent at the close, falling for the seventh time in eight days. Financial companies were the worst performers, with Ping An Insurance (Group) Co. and Industrial & Commercial Bank of China Ltd. losing at least 1 percent. The Shanghai Composite Index climbed 0.2 percent, led by consumer and health companies. Turnover in Shanghai has been drying up, falling to levels last seen regularly in 2014. The ChiNext small-cap index fell to the lowest level since March 16.

The Hang Seng China Enterprises gauge of some of the country’s largest companies has tumbled 8.7 percent from their April 21 high, the worst performance among global gauges after Namibia, as a bull-market rebound reversed. The most recent data has showed March’s pick up in economic indicators didn’t carry over to April, with manufacturing gauges and trade figures missing predictions, while a high-profile warning by the People’s Daily about the nation’s high levels of debt have damped hopes for more easing.
Data on Tuesday showed Chinese consumer prices rose for a third month.

“Right now the market isn’t expecting any economic recovery or that there will be much policy support like cuts in the required-reserve ratio or interest rates,” said Castor Pang, head of research at Core-Pacific Yamaichi Hong Kong.

Market Support

Investor sentiment is also being hurt by speculation the government won’t prop up equities as frequently as in the past, Pang said. State-backed funds should be long-term investors in the A-share market and avoid short-term intervention, the Economic Information Daily wrote in a front-page commentary on Wednesday.

The so-called H-shares gauge traded at 8,443.67 at the close in Hong Kong. Financials comprised half of the index’s 10 biggest losers. China Citic Bank Corp. slid 0.9 percent, while Bank of Communications Co. lost 1.7 percent.

The consumer-price index rose 2.3 percent in April for a third straight month, matching economist estimates in a Bloomberg survey. Faster inflation may cut the odds for more monetary easing. The People’s Bank of China has lowered benchmark interest rates six times since 2014, helping fuel an advance in the bond market and driving debt to a record 247 percent of gross domestic product in 2015.

Staples Rally

Automakers rallied in Hong Kong, with Dongfeng Motor Group Co. and Great Wall Motor Co. advancing at least 2 percent. China’s April vehicle sales climbed 6.3 percent from a year earlier, according to the China Association of Automobile Manufacturers.

The Shanghai Composite posted its biggest gain in a week to close at 2,837.04. Average daily trading by value this year fell to 209 billion yuan ($32 billion), less than half of the average last year, according to data compiled by Bloomberg.

Gauges of health-care companies and consumer-staples producers in the CSI 300 both jumped at least 2.4 percent, while the broader index added 0.5 percent. Tsingtao Brewery Co. soared 3.7 percent, while Wuliangye Yibin Co., the second-biggest maker of Maotai liquor, added 2 percent.

The traditional spirits industry is rebounding as the impact of the government’s anti-corruption campaign fades, with companies are rebuilding their customer bases on private-company buying and higher consumer spending, Citigroup Inc. analyst Xiaopo Wei wrote in a note.

The Hang Seng Index slumped 0.9 percent in trading volumes that were 13 percent lower than the 30-day average. Traders have pulled a net $142 million from the iShares MSCI Hong Kong ETF in May, poised for an 11th straight month of net outflows and the longest string of declines on record. For Standard Life Investments Ltd., Hong Kong is suffering from a surfeit of bad news. China’s slowdown is affecting everything from trade to retail sales, a dysfunctional political system is delaying bills and spurring calls for independence.

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