China's Small Caps Fall to Three-Month Low on Regulation Concern

  • China H shares drop below 10,000 for first time in two months
  • Shanghai Composite Index marks worst four-day drop of 2017

The slump in Chinese stocks deepened Wednesday, with the ChiNext gauge of small-cap shares posting its lowest close since mid-January and the Shanghai Composite Index sliding for a fourth day.

The ChiNext closed down 0.2 percent in Shenzhen, paring a loss of as much as 1.9 percent, while the Shanghai Composite fell 0.8 percent. The Hang Seng China Enterprises Index slid below the key 10,000 level for the first time in two months. PetroChina Co. closed at its lowest in four months in Hong Kong, and China Minsheng Banking Corp. declined after saying one of its branch heads is being investigated by police.

The ChiNext index has fallen 6 percent this year, extending 2016’s 28 percent rout. The measure, typically the most speculative part of the market, has led losses this month after China’s anti-graft agency said it’s probing the nation’s top insurance official Xiang Junbo. In a weekend speech, securities regulator chairman Liu Shiyu called for China’s bourses to punish behavior that disrupts the market “without mercy.”

“Recent news in the finance industry has got investors worried about stricter scrutiny and hurt market sentiment,” said Linus Yip, Hong Kong-based strategist with First Shanghai Securities Ltd.

The benchmark Hang Seng Index dropped 0.4 percent to 23,825.88, its lowest close since March 15.

  • In Hong Kong, Air China Ltd. slid 3.3%, China Eastern Airlines Corp. retreated 4.8% and China Southern Airlines Co. fell 3.6%. Chinese airlines will struggle to increase profits this year given fuel price pressure, airports’ domestic tariff hikes and potential yuan depreciation, Morgan Stanley analysts Edward Xu and Lin He wrote in a note Tuesday.
  • Wangsu Science & Technology Co. jumped 7% in Shenzhen after the company said in a statement after Tuesday’s market close that it’ll pay a cash dividend of 2.5 yuan and give 20 bonus shares to investors for every 10 stocks they hold.
  • China Medical & HealthCare Group Ltd. climbed 2.6% in Hong Kong as trading resumed following a halt Tuesday pending a shareholding change. Tsinghua Tongfang Co. will buy a 27.62% stake in the company from Vigor Online Offshore Ltd., according to a statement to the Shanghai Stock Exchange.
  • The founder of China Huishan Dairy Holding Co. has raised HK$355 million ($45.7 million) by selling part of his stake in Jilin Jiutai Rural Commercial Bank Corp., as the company’s four-week reprieve on loan repayments draws to a close. The firm lost two directors this week, leaving the board without the minimum required to act on behalf of the company. In late March, Huishan’s shares sank by a record 85 percent in one day in Hong Kong before trading was halted.

— With assistance by Amanda Wang

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