China Shares Resume Decline as Year's Top Performers Take a Hit

Updated on
  • CSI 300 drops 1.3% after sliding most in 17 months on Thursday
  • Consumer staples subgauge is still up 65% year-to-date
Barings' Do Says 2018 Could be Tricky for Equities

After taking a breather in the wake of a battering Thursday, Chinese shares resumed their decline Monday, with some previously high-flying consumer and technology companies among the hardest hit. 

The CSI 300 Index of large-cap stocks closed down 1.3 percent, with ZTE Corp. and BYD Co. both falling the 10 percent limit in Shenzhen, while BOE Technology Group Co. slid 9.7 percent. Shanghai-listed liquor giant Kweichow Moutai Co. couldn’t maintain its brief foray into positive territory and closed down 1.4 percent, its seventh straight loss since state media warned it was climbing too fast. The stock has slumped 14 percent since Nov. 16.

“Institutional investors are choosing to cash in toward year-end as valuations are near historic highs and market sentiment deteriorated after official media targeted Moutai,” said Shen Zhengyang, Shanghai-based analyst at Northeast Securities Co. He said the market “lacks steam” for further gains.

The CSI 300 consumer staples subgauge fell 1.5 percent Monday, deepening a 6.8 percent decline posted in the final three sessions of last week. Yonghui Superstores Co. was hardest hit Monday, with a loss of 7.2 percent. The consumer discretionary index fared even worse, falling 2.1 percent as BYD weighed.

The Shanghai Composite Index lost 0.9 percent and the Shenzhen benchmark dropped 1.6 percent, with losses accelerating through the afternoon.

H Shares Decline

Shares were also lower in Hong Kong as some of the year’s best performers declined. BYD’s H shares were among the biggest losers on the Hang Seng China Enterprises Index, falling 3.4 percent. Ping An Insurance Group Co., the strongest stock on the index in 2017 with a 110 percent gain, also fell Monday.

The Hang Seng China Enterprises Index lost 1.1 percent and the benchmark Hang Seng Index fell 0.6 percent. Airlines were among those hardest hit after oil’s rise at the end of last week, led by China Southern Airlines Co., which slid 5.7 percent in Hong Kong on Monday, its biggest loss since August last year. The company’s H shares climbed 26 percent over the last two weeks. China Eastern Airlines Co. fell 4.7 percent Monday, the most in seven months.

“The slides continue as blue chips have gained significantly this year,” said Shao Rui, analyst at Shanghai Securities Co. “The tighter liquidity conditions prompt institutional investors to lock in their profits.”

After injecting a net 150 billion yuan last week, the central bank’s additions via open-market operations matched maturities Monday, suggesting cash supply will remain tight. China’s 12-month interest-rate swaps climbed for the first time in three sessions. The yield on 10-year government bonds rose two basis points to 3.99 percent.

— With assistance by Tian Chen

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE