Hong Kong shares suffer 4th loss, China’s winning streak snapped
HONG KONG, May 8 — Hong Kong shares suffered a fourth straight loss today, as weakness in Chinese property developers helped reverse early gains with benchmark indices retreating from stiff chart resistance formed after yesterday’s big tumble.
Mainland Chinese markets were also weaker, snapping a four-day winning streak as investors took profits on the year’s outperformers. The CSI300 Index slipped 0.3 per cent, while the Shanghai Composite Index lost 0.1 per cent.
The China Enterprises Index of the top mainland listings lost 0.5 per cent. The Hang Seng Index slipped 0.3 per cent at 20,484.8, slipping further from its 50-day moving average, which was stiff resistance until April 30. Yesterday, the index plunged 2.6 per cent.
The Hang Seng is seen hovering between its 50-day moving average, currently at 20,293.8 and its 200-day moving average, now at about 19,894.4, which coincides with its April lows.
Hong Kong bourse turnover ranked among the lowest this year, while A-shares trading volume in Shanghai stayed above its 20-day average despite slipping marginally from yesterday.
“With no firm, positive catalyst, it will be difficult to see any real strength on the Hang Seng Index in the near term, although China data from Thursday onwards could help,” said Edward Huang, equity strategist with Haitong International Securities.
Beijing is expected to announce April trade data on Thursday and inflation, industrial output and retail sales on Friday. Data for loan growth and money supply are expected between May 10 and 15.
Today, Chinese developers were broadly weaker. Agile Property Holdings Ltd retreated 3.7 per cent in almost triple its 30-day average volume.
In a note to clients today, Credit Suisse analysts said primary market volumes in the mainland physical property market declined 8 per cent last week from the previous one.
“Strategically, we think the best time to make money from property is behind us,” said David Cui, Bank of America Merrill Lynch’s chief China equity strategist.
Chinese official media confirmed today that the country’s largest lender, Industrial and Commercial Bank of China (ICBC) , had suspended mortgage discounts for first-time home buyers, exacerbating fears that a sector pivotal to the world’s second-largest economy could be badly battered.
In a second note, Credit Suisse said the ICBC move confirmed its view that the first-home mortgage rate was market-driven and a policy indicator, suggesting that this development should not be seen as a major negative for the sector.
“On the same token...the 40 per cent rally for China property year to date probably was at least partially based on this misbelief,” Credit Suisse property analysts, headed by Du Jinsong, said in the second note.
Further weighing on sentiment today were a slew of brokerage reports, including two from CICC and BofA-ML today, that warned of further downgrades in earnings expectations for Chinese companies after dismal quarterly results.
Chinese banks, seen as barometers of the economy, were also weaker. Bank of China slipped 0.7 per cent in Hong Kong and 0.3 per cent in Shanghai.
Profit taking hits outperforming Chinese brokers
Chinese brokerages, a hot sector in 2012 on expectations they could gain from further reforms to mainland financial markets, were weaker as investors took some profit.
Citic Securities lost 2 per cent in Shanghai and 1.3 per cent in Hong Kong. Haitong Securities slipped 1.8 per cent in Shanghai and 1.3 per cent in Hong Kong.
Citic and Haitong, among the biggest brokerages in the mainland, have each surged about 35 per cent in Shanghai this year. The Shanghai Composite Index is up 11.3 per cent, while the CSI300 Index is up 15.5 per cent in 2012.
In Hong Kong, Citic this year has jumped almost 27 per cent, compared to the Hang Seng Index’s 11 per cent gain. Haitong has gained almost 4 per cent since listing in Hong Kong on April 27.
Mainland Chinese markets have been bolstered by reform efforts by regulators, with many brokerages expecting the A-share market to continue outperforming its offshore, H-share counterparts, at least in the short term.
Among the developments that emerged from a just-completed financial innovation conference in Beijing, regulators said that retail investors in China would soon be able to trade in a nationwide over-the-counter market for non-public companies, similar to the US OTC Bulletin Board. — Reuters