Mainland China markets may lose momentum as key meetings wrap up in Beijing
CSRC vice-chairman says launch of Shenzhen-Hong Kong stock connect scheme feasible in second half of year
The mainland markets traded flat on Tuesday, while Hong Kong posted small losses, with some analysts warning the recent mild rebound might be coming to an end, with positive sentiment fading after key meetings in Beijing offered little hope of an economic turnaround.
The mainland’s benchmark Shanghai Composite Index ended the day just 0.17 per cent or 4.87 points higher at 2,864.37, while despite positive remarks on the long-awaited Shenzhen-Hong Kong stock connect scheme by China Securities Regulatory Commission (CSRC) vice-chairman Fang Xinhai, the Shenzhen Composite Index fell 0.93 per cent or 16.21 points to 1,729.08. The Nasdaq-style ChiNext Index lost 1.30 per cent to 1,996.92.
Hong Kong’s benchmark Hang Seng Index eased 0.72 per cent to 20,288.77 and the Hang Seng China Enterprises Index shed 0.93 per cent to 8,605.63.
Fang was quoted by the RTHK on Tuesday afternoon as saying it was “feasible” the cross-border stock-trading link between Hong Kong and Shenzhen could be launched in the second half of the year.
Kevin Leung, the director of global investment strategy at Haitong International Securities, said the market had been expecting Beijing to kick off the scheme before June in a bid to facilitate the A-share market’s inclusion in the MSCI Emerging Markets Index, a major index tracked by many big funds around the world.
“The recent risk appetite revival, partly helped by a warming oil prices and extended easing from the European Central Bank, has led a mild recovery on the Hong Kong market, but I don’t see them as sustainable upward catalysts,” Leung said. “As more mainland-based companies disclose their annual results for 2015, which I am not optimistic about, the [Hong Kong] market may correct from the current level to a bottom at 18,300. The mainland market is also without solid support, and is very likely to drop as the two sessions finish this week.”
However, Jun Yang Securities chief executive Kenny Tang Sing-hing said the near-stagnant market sentiment was only temporary.
“The Dow Jones lacked a clear direction overnight. Also, oil prices are down more than 4 per cent, so sentiment today is quite flat,” Tang said. “It’s just a short-term selling pressure, the market is likely to go higher in the future. The Hang Seng Index is likely to rise to the 20,500 to 20,600 level.”
Premier Li Keqiang was set to address the press at the closing of the National People’s Congress meeting on Wednesday, Tang said.
“The congress meeting is quite focused on economic growth,” he said. “The market is waiting to see whether some new measures will come from the government to stimulate the economy.”
Property developer China Vanke fell 3.62 per cent to HK$19.42 in Hong Kong after failing to provide further details on who would emerge as its largest shareholder following a proposed restructuring. The company announced earlier that it would acquire up to 60 billion yuan (HK$71.7 billion) of property assets from state-backed Shenzhen Metro.
In Asian trading on Tuesday, Tokyo’s Nikkei 225 fell 0.68 per cent to close at 17,117.07 after the Bank of Japan announced it would keep negative interest rates unchanged. Australia’s S&P/ASX 200 index dropped 1.48 per cent to 5,111.42.
Global investors stayed on the sidelines before a US Federal Reserve meeting starting on Tuesday. It is not expected to raise US interest rates.
Additional reporting by Naomi Ng
