Hong Kong Stocks Slide on Fed Comments, Shanghai Slump

31 Aug 2015 | Author: | No comments yet »

China Markets LiveWelcome to the SCMP’s live markets blog. 0438 GMT [Dow Jones] Hong Kong equities slide in the morning session, extending losses for the Hang Seng HSNGY -1.11 % Index as it closes in on its fourth consecutive down month after the worst monthly losses since September 2011. “Rhetoric shared from last weekend’s Fed retreat at Jackson Hole, Wyoming, conference, has brought the Fed’s September meeting as an event risk back onto the table once more,” writes Nicholas Teo at CMC Markets.Mainland Chinese markets finished the morning trade lower on Monday, led by losses in financials and energy although dealings seemed to be light in a holiday-shortened week.

Chinese shares took a dive, weighing on regional benchmarks, following reports that Beijing has scrapped large-scale share purchases as a method of propping up markets.Chinese shares ended the week almost eight per cent lower after volatile trading that started on Monday with shock losses and spread fear to global markets.

Investors are increasingly focused the broader question of how this episode might affect the wider economy as many suspect the equity bubble has yet to fully deflate. We’ll bring you the key levels, trading statements, price action and other developments as they happen. 1:11pm: The Shanghai Composite Index opened afternoon trade at 3,134.9 point, down 3.02 per cent, or 97.45 points. Chinese authorities are estimated to have spent about $200bn trying to support the crumbling equities market, but with questionable and short-lived results.

In recent weeks, the withdrawal of some government support prompted a sharp sell-off, and the two primary benchmarks had both fallen below the levels of early July at which the government initially stepped in to shore up confidence. Some took profit as they think the rally is not sustainable.” Angus Nicholson, an IG Markets analyst, said investors remained concerned about China and when the Federal Reserve will raise US interest rates. Last week, volatility in mainland Chinese shares spilled over into global markets, sending investors into the perceived safety of assets such as government bonds and the Japanese yen. We expect the companies to sell advertisements and collect commissions from the growing number of offline merchants and service providers keen to access the internet companies’ large consumer bases through O2O partnerships.

Two figures to underline the need for more moderate growth: the average over the last three decades was 10 per cent, and investment has been more than 45per cent of national income, or GDP, every year since 2009. Investors were also digesting new data showing that Japanese inflation fell back to zero in July, raising speculation that the central bank would launch a fresh round of stimulus. Marking the end of a week of corporate results, the supermarket Woolworths reported a 12.5 per cent drop in full-year profit – its first fall in almost two decades.

Shares on Wall Street rose overnight and oil prices jumped sharply after revised figures showed the US economy expanded far more than originally thought in the three months to June. In Australia, a morning drop of 1.7 per cent took declines for the S&P/ASX 200 to 9.2 per cent for the month, the worst performance since October 2008.

A number of Fed policymakers highlighted the intensifying debate over whether the US inflation outlook is strong enough to justify a rate increase as soon as September given the market turmoil in and outlook for China. Australian dollar to US dollar weaker by 0.49 per cent to 0.7138. 10:56am: China Properties Investment Holdings, which invests in properties, mining and educational support services, is the top loser on the stock exchange of Hong Kong today as it fell 73.88 per cent within 40 minutes after the market opened to trade at 35 hk cents at 10:20am, with a turnover of HK$203.89 million. 10:55am: Shares of Zijin Mining, China’s largest gold smelter, dropped 3.5 per cent to HK$1.92 at 10:41a.m., after it reported late on Sunday a 20.8 per cent year-on-year rise in net profit to 1.34 billion yuan for the year’s first six months. The CSI 300 Index is 2.8 per cent down, 93.81 points, at 3,248.48. 10:36am: The Shenzhen Composite Index is off 2.27 per cent, 41.89 points, at 1,804.93.

Offshore yuan trades at 6.4502 to the dollar, stronger from the previous close at 6.4610. 9:32am: Citic Securities said in a filing to the Shanghai Stock Exchange website media reports that a couple of its top executives are under investigation by the police. “The company is now facing a ‘grave challenge’ and has been self-checking the problems in its operations,” the broker’s chairman Wang Dongming and general manager Cheng Boming wrote in a note to all of its employees Sunday, financial magazine Caixin reports. Huatai Securities topped the estimated net buy turnover among Southbound trades for the week while Ali Pictures has now taken the lead and topped since SH-HK launched.” “China’s economic growth was very weak in early 2015, reflecting a combination of slowing money/credit growth, reform-driven fiscal tightening, and an appreciating CNY, among other factors. The snap 3 per cent depreciation in the CNY is small in a macro context, but represents the sharpest weakening in two decades that were dominated by stability/appreciation vs USD, and has prompted an acceleration in capital outflows, heightening the risk of a larger move down the road. Growth has already been disappointing, especially in the smaller open economies of the region, and we mark down our growth forecasts for several economies to reflect a weaker external environment.” “Ahead of Victory Day celebrations in China, the authorities are likely to do their utmost to bring stability to both the exchange rate and the stock market. The ECB meeting should be low-key with no change in policy and only minor adjustments to staff projections.” “The official (CFLP) manufacturing PMI is due tomorrow at 9 am local time (consensus 49.7, prior 50.0).

We think the authorities care about the official index and the prospect of a slide to sub-50 contractionary territory will sustain hard-landing worries. The decline to 50.0 in July from 50.2 in June was associated with a drop in industrial production growth to 0.32 per cent MoM SA from 0.62 per cent in June. .Good news is that economic reforms are on track despite the current economic turmoil. The official Xinhua News Agency reported on Saturday that the NPC Standing Committee approved scrapping the 75 per cent loan-to-deposit ratio ceiling effective October 1. The Xinhua News also quoted Premier Li as saying that “the Chinese economy is operating within an appropriate range and China continues to lead the world in terms of growth” and that “in the context of complex changing situations abroad and deep-rooted problems at home, we pressed ahead with progress while ensuring stability with sustained efforts for structural reforms and targeted macro-regulation measures”. Net profits dipped 2 million yuan to 249 million yuan. 9:05am: No Shanghai listed A-share companies resume trading today while no companies applied for voluntary suspension of their shares.

CSI300 (green) which tracks the big caps listed in Shanghai and Shenzhen and the Nasdaq style ChiNext (blue) also experienced a bumpy ride during the month. The company has already issued the first tranche, a five year 3 billion yuan bond paying a 4.7 per cent coupon. 8:49am: A mainland China journalist has “confessed” to spreading rumours and causing market chaos and a CSRC official “confessed” to economic crimes including insider trading, Xinhua reported on Sunday.

Wang Xiaolu, a journalist with Caijing magazine, was taken away by mainland authorities for investigation related to the market rout last week along with CSRC official Liu Shufan and several Citic Securities officials. Click to enlarge chart. 8:08am: Evergrande Real Estate (yellow), China’s third-biggest developer by assets and one of the most indebted among its peers, will release interim results today.

Its share price (yellow) underperformed the benchmark Hang Seng Index (purple) from late May to mid-July, and then outperformed the benchmark from mid July to late August. Click chart to enlarge. 8:03am: Infrastructure and real estate firm Shanghai Industrial Holdings (yellow) will announce its first-half earnings today. The company, which has vowed to overtake Russia’s Rusal to be the world’s largest aluminium producer, will meet the media at 11 am today to discuss its financial results and business prospects.

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