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Chinese Stocks Cap Their Biggest Weekly Decline in Eight Months

Updated on
  • Rising money market rates trigger losses in Chinese assets
  • Property developers are biggest decliners for the week

Chinese stocks capped their steepest weekly retreat since April as surging money market rates reduced investor demand for the nation’s assets.

The Shanghai Composite Index slumped 3.4 percent this week, ending Friday 0.2 percent higher at 3,122.98 at at the close. Property companies fell the most during the week, with China Vanke Co. plunging more than 9 percent. A regulatory crackdown on insurers’ stock investments added to investor jitters. China Huishan Dairy Holdings Co. suspended share trading Friday after short seller Muddy Waters Capital LLC said the company is “worth close to zero.” The Hang Seng China Enterprises Index lost 0.1 percent, taking its weekly loss to 4 percent.

China’s sovereign bonds headed for the biggest weekly decline in two years as the central bank sought to force a correction in the highly leveraged debt market by steering money market rates higher. Home prices are also showing signs of cooling after cities rolled out measures to curb gains, while concern about a faster pace of U.S. interest-rate hikes is pressuring the yuan, already at an eight-year low.

The Hang Seng Index slipped 0.2 percent, taking its weekly loss to 3.3 percent, while the Shenzhen Composite Index rose 1 percent. Volume on the CSI 300 Index was 39 percent less than its 30-day average, according to data compiled by Bloomberg.

“We are facing too many uncertainties," including the U.S. interest rate outlook and capital outflows from China, said Steven Leung, Hong Kong-based executive director at UOB Kay Hian. “Before we see more firm views on these factors, investors will not simply jump into the market. Without too much liquidity in the market, it’s not easy to see a big rally -- but the downside is still limited because the economic situation is still steady."

The 10-year sovereign yield has surged 25 basis points so far this week, the most since December 2014, to 3.35 percent on Friday. The one-year yield jumped 50 basis points, while the five-year rose 27 basis points. The yuan is heading for the biggest weekly decline in a month.

  • China Life Insurance Co., PICC Property & Casualty Co., Ping An Insurance (Group) Co. paced declines on the HSCEI with losses of at least 1%; the China Insurance Regulatory Commission will mull lowering the cap that a single shareholder can own in an insurer to 33% from the current 51%, Vice Chairman Chen Wenhui told Xinhua
  • Huishan Dairy dropped as much as 4.3% before halting its shares pending response to Muddy Waters report questioning its profitability
  • Eminence Enterprise Ltd. jumped 29 percent after more than half of shareholders voted against a proposed rights issue plan.
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