Hong Kong and China shares fell on Monday, with growth-sensitive sectors hurt most after a mainland Chinese newspaper controlled by the central bank reported that cuts in reserve requirements for commercial lenders are unlikely in the near term.
Doused easing expectations were aggravated by data over the weekend that showed housing prices in China rising for a second straight month, renewing fears that Beijing may seek to step up a two-year campaign to curb housing inflation.
Shares of Chinese developers and related sectors listed in the mainland were hard hit, extending their downward spiral from the time that data on July 18 revealed the first rise in China housing prices in nine months.
The CSI300 Index of top Shanghai and Shenzhen listings slipped 0.51 percent, while the Shanghai Composite Index shed 0.38 percent after earlier plumbing a near 3-1/2 year low at midday.
The Hang Seng Index shed 0.06 percent to 20,104.27, paring midday losses to return above the 20,000-point level that it has finished above for the bulk of the last two weeks.
All four benchmark indexes recovered to finish near the session's highs, but losses came in weak volume that traders said were partly the reason for choppy trade on the day. Mainland Chinese markets suffered mainly because money supply stayed tight.
“It's a case of the Monday blues,” said Jackson Wong, vice-president for equity sales at Tanrich Securities. “There's definitely some fatigue because people have been going into the weekends expecting Beijing to act and nothing happens.”
Smaller Chinese banks were among the harder hit in the sector. China Merchants Bank Co Ltd , which posted a 25.7 percent rise in first-half net profit to 23.38 billion yuan after markets closed on Friday, slid 1.4 percent in both Hong Kong and Shanghai.
The state-run Shanghai Securities News reported on Monday that Beijing could move to expand a property tax pilot scheme to include more cities or adjust presale requirements for property transactions.
Shanghai-listed Poly Real Estate (Group) Co Ltd dropped 3 percent to the lowest since April. It is still up 20 percent this year, but has lost 15 percent since July 18, when data showed housing prices in China rose for the first time in nine months.
“Mainland investors are definitely more sensitive to housing prices, although I think the latest monthly increase is more an effect of interest rate cuts,” Wong added.
EARNINGS, EARNINGS, EARNINGS
Corporate earnings were a focus and are set to remain so for the rest of the month. China's August flash PMI on Thursday could also offer investors fresh clues on the slowdown in the world's second-largest economy.
In a report on Monday, Goldman Sachs analysts said overall earnings were flat year on year, excluding financials, from the 24 MSCI China companies that posted first-half earnings as of Aug. 17, representing 24 percent of market capitalisation. Including financials, overall earnings declined by 1 percent.
“First-half earnings so far have reached 46 percent of annual consensus forecasts, weaker than the 53 percent achieved in the first half last year,” they said in the same report.
Chinese instant noodle producer Tingyi (Cayman Islands) Holding Corp jumped 5 percent to close at the highest since May 4. Gains accelerated after it posted at midday first-half net profit on optimism that cost controls will improve margins for the rest of the year.
Before Monday, Tingyi was down 15.8 percent this year and trading at 25 times its forward 12-month earnings, a 2.8 percent premium to its historical median, according to Thomson Reuters StarMine.
China Pacific Insurance (Group) Co Ltd fell 1.2 percent in Hong Kong and 3.5 percent in Shanghai after posting a 55 percent fall in first-half net profit to 2.67 billion yuan. - Reuters