HONG KONG, June 4: China share indexes fell more than 1 percent and weighed on Hong Kong markets after official media reported that applications by brokerages to start mutual funds appeared to have stalled.
Jitters over possible tightening lingered after the central bank drained 14 billion yuan ($2.28 billion)at the first of its two open market operations this week. Last week, they drained 17 billion yuan combined.
At midday, the CSI300 was down 1.5 percent at 2,564.8 points, its biggest daily loss since May 14. The Shanghai Composite Index fell 1.2 percent. They have declined 3 and 2 percent, respectively, from May highs.
Sentiment was further soured in the mainland by another tumble for small and mid-cap counters, outperformers on the year. The ChiNext Composite fell 2.4 percent and is now up 35.5 percent for the year, compared to the 1.7 percent gain for the CSI300.
The Hang Seng Index slipped 0.3 percent, while the China Enterprises Index of the top Chinese listings in Hong Kong lost 0.4 percent. The indexes, which have fallen the past four days, have now slid 5.4 and 7.4 percent from their respective May peaks.
Markets have become particularly sensitive to U.S. Data since the Federal Reserve began raising the prospect of scaling back its bond-buying program if the world’s largest economy shows it is on a sustainable growth path.
‘It’s a very macro-driven market right now. Most macro hedge funds will love it, but for others, if they can’t short, they should probably stay away,’ said Hong Hao, chief strategist at Bank of Communication International.
‘We are probably moving into a low liquidity environment, so despite the correction we saw last week, high dividend yield names will continue to outperform,’ Hong added.
China National Building Material (CNBM), which fell 2.2 percent on Monday, tumbled another 3.6 percent to its lowest since September.
Deutsche Bank analysts said in a note dated June 3 that the company is planning an H-share issuance after the reported withdrawal of its A-share initial public offering application. Any issuance will be of little help to the company’s balance sheet, DB analysts said.
Haitong Securities sank 2.9 percent in Hong Kong and 2.8 percent in Shanghai after the official China Securities Journal reported that some brokerages believe their applications to start mutual funds have stalled.
Mainland regulators had earlier said brokerages could start offering mutual fund products at the start of June.
Posting a solid gain on Tuesday was Lenovo Group, which jumped 3.3 after the world’s second-largest PC maker by shipments said it was in preliminary talks with an unidentified party on a smartphone business joint venture. It gave no details.
Hong Kong property developer Wharf Holdings rebounded 2.3 percent from Monday’s six-week closing low, with traders citing a rating upgrade by JP Morgan from ‘neutral’ to ‘overweight’. ($1 = 6.1317 Chinese yuan)
(AGENCIES)
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