HONG KONG, Sept 11: Hong Kong and China shares fell for the first time in four sessions on Tuesday, as investors took profits on a rally sparked by newly approved infrastructure plans while remaining cautious ahead of key events in Europe and the United States.
A German court ruling on the legality of the European bailout fund is due later in the day and a two-day U.S. Federal Reserve meeting ends on Thursday, with market players watching for signs of a third round of quantitative easing.
General gloom over China’s economy—on track for a seventh-straight quarterly slowdown—also weighed on the sentiment despite August loan growth in China exceeding expectations.
Trade and industrial output figures have been anaemic while inflation has risen, possibly limiting Beijing’s scope for monetary easing.
‘Fundamentals haven’t improved. In fact the latest set of data suggests the slowdown in the Chinese economy could yet worsen, so it’s tough to look beyond the short term,’ said Edward Huang, equity strategist at Haitong International Securities.
The CSI300 Index of the top Shanghai and Shenzhen listings fell 1 percent at midday after jumping 5.8 percent in the preceding three sessions. The Shanghai Composite Index fell 0.9 percent.
The Hang Seng Index shed 0.6 percent after rising 3.6 percent over the previous three sessions. The China Enterprises Index of the top Chinese listings in Hong Kong slid 1.1 percent.
Bank of Communications International Securities said that last Friday’s gains in the mainland market ranked as one of the top five days in the past 15 years with a significant surge in both volume and price action.
Infrastructure-related stocks, among the biggest advancers in the past three sessions, gave up some of their gains to rank among the biggest losers on Tuesday.
Anhui Conch Cement , which surged 15.5 percent in Shanghai in the three days before Tuesday, shed 3.2 percent on Tuesday. It lost 2.3 percent in Hong Kong after jumping 12.5 percent in the last three sessions.
Chinese excavator maker Sany Heavy Industry shed 2.6 percent in Shanghai, while Changsha Zoomlion shed 2.3 percent in Shenzhen and 4.1 percent in Hong Kong.
Several brokerages have questioned whether the 1 trillion yuan worth of infrastructure projects reportedly approved by China’s top economic planning agency amounted to new investments, saying some projects were approved as early as April as part of local government plans.
But Huang at Haitong International said Beijing’s backing was key. ‘Investors must be ready to trade on policy announcements, like last Friday. It may or may not amount to anything new, but that it comes from Beijing means they are certain to be implemented, compared to local governments with strained finances,’ he said.
Chinese banks were also among the biggest drags on benchmarks in Hong Kong and mainland Chinese markets.
Industrial and Commercial Bank of China (ICBC) lost 1.9 percent in Hong Kong, giving up more than half of its gains in the last three sessions. It shed 1.1 percent in Shanghai.
The Chinese property sector was hurt by a local media report that the city of Nanjing restricted price increases to 5 percent. The Shanghai property sub-index slipped 1.4 percent, with Poly Real Estate down 1.7 percent.
The sector has been hard hit by fears of more curbs on the sector since data in mid-July show housing prices rose for the first time in nine months. Despite acting to ease policy, Beijing has resolutely refused to relent on the property sector. (agencies)
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