The H-shares index finished at 11,060.06, down 0.19 per cent or 20.86 points. It lost 1.50 per cent against last week.

3:26pm: China indices from opening to closing today: the Shanghai Composite (orange), Shenzhen Composite (green), CSI300 (purple) and ChiNext (blue). Click to enlarge. 

3:21pm: While today was subdued, it was a strong week overall for China markets.

The Shanghai Composite Index gained 5.91 per cent over the week, the CSI300 improved 4.26 per cent, the Shenzhen Composite Index lifted 6.12 per cent and the ChiNext Price Index picked up 3.76 per cent.

3:10pm: The Shanghai Composite Index closed at 3,965.34, up 10.78 points or 0.27 per cent. The CSI300 drifted to 4,073.54, down 1.92 points or 0.05 per cent.

3:10pm: The Shenzhen Composite Index closed at 2,310.40, up 11.61 points or 0.50 per cent. The ChiNext slid to 2,674.02, down 10.24 points or 0.38 per cent.

3:08pm: Sands China has announced a year-on-year revenue decline of 30.7 per cent and profit drop of 46.4 per cent for the first half. Mall revenues increased 22.6 per cent but the gain was dwarfed by the 34.4 per cent fall in casino revenues to US$2.99 billion (HK$23.26 billion). The share price has inched up 0.9 per cent to HK$33.80 today.

3:03pm: The Hang Seng Index slips back to 23,985.61, down 0.14 per cent or 33.19 points. The H-shares index goes to 11,032.70, down 0.44 per cent or 48.22 points.

3:01pm: Ray Farris, chief fixed income strategist of Credit Suisse said:

“We are maintaining our forecast for USD/CNY (onshore yuan) to rise to 6.60 in three months, at the risk of being slightly aggressive. Cyclically, China's economy is weak leading us to expect further monetary easing from China's central bank even as the US Fed begins tightening policy later this year.

 We expect the US dollar to appreciate about 3 per cent against the major currencies over the next several months and about 8 per cent over the next year. This should keep broad USD-EM under upward pressure, exerting upwared pressure on USD/CNY.
 
More generally, China's weaker than expected growth and monetary policy divergence with the US combines with China's anti-corruption campaign to argue that the onshore yuan should be cyclically weak.

The fact that the People’s Bank of China has lost $185 billion in foreign exchange reserves over the past year defending the onshore supports this view. 

We stress that it is still early days in this change. We will need to adjust expectations as People’s Bank of China actions reveal details of the new management style.”

Click on chart below to enlarge.

2:55pm: Hong Kong Investment Funds Association chairman Bruno Lee Kam-wing, will join  Manulife Asset Management as its Head of Partnership, Product and Platform Development, Wealth and Asset Management, Asia from September 1. 

Lee is now head of Hong Kong of Fidelity, a position he will hold until the end of this month. 

The role is a new post and the appointment is part of Manulife’s ongoing integration of the company’s Asia wealth and asset management teams to strengthen its foothold in the region. 

Based in Hong Kong, he will report to Michael Dommermuth, Head of Wealth and Asset Management, Asia for Manulife Asset Management.

“Since the start of the year, we’ve been working to bring our wealth and asset management businesses together in the region, combining institutional investment management with retail distribution. We are very pleased to welcome an industry veteran like Bruno to the team and believe he will play a key role in strengthening our distribution platform and helping to drive the overall growth of our business in Asia,” Dommermuth said. 

2:41pm: Mark Konyn, a veteran fund manager and former chief executive of Cathay Conning Asset Management, will join AIA Group as Group Chief Investment Officer and a member of the AIA Group Executive Committee, with effect from September 1, 2015. 

He will succeed John Chu, who will step down from September 1 and will retire from December 1 after a handover period to Konyn. 

Konyn, a British academic turned fund manager, has been based in Hong Kong since 1989.

He has taken senior executives of several financial firms and was former regional chief executive of RCM, part of Allianz Global Investors. He established CCAM in 2012 and as its chief executive until departing recently.

He holds a Phd in Risk Analysis and a Diploma in Investment Management from the London Business School. He is a Fellow of the Royal Statistical Society and was a committee member of the FT Actuaries policy group. 

AIA chief executive Mark Tucker said:

“We are delighted Mark is joining the team. Mark brings to AIA extensive investment and regional experience in managing insurance, pensions and mutual fund assets for a number of large and well recognised companies and institutional investors in Asia and globally.” 

2:31pm: Suanjin Tan,  Portfolio Manager of Asian Fixed Income of BlackRock, said: 

“While short term volatility may remain high, in particular in the offshore renminbi (CNH), we believe that some stabilization will happen soon as the People’s Bank of China (PBoC) has taken steps to calm the market and maintaining that they see no basis for continued depreciation.

Moreover, China has both the moral suasion as well as the financial firepower to keep things stable if they want to. Yesterday, we already saw a much calmer market and a decent recovery in CNH.  Today, CNH continues to recover and onshore yuan (CNY) Fixing rises for the first time since devaluation to 6.3975. 

PBoC also spoke about a consistent offshore and onshore yuan exchange rate which suggests that they will implement additional measures to converge the two. The CNH/CNY differential has now compressed dramatically from in excess of 2 per cent to 0.7 per cent after the comments from the PBoC, and we should expect further compression to take place as the market normalizes.

This all makes sense. Why would PBoC allow the currency to depreciate further to risk triggering capital outflows – an undesired outcome.

We expect renminbi shall be reaching its new equilibrium at around 6.4-6.5 levels. IMF has also expressed that China’s currency regime shift is a welcoming act and the devaluation does not impact its decision on inclusion of yuan in the Special Drawing Right (SDR) basket.”

2:30pm: New Silkroad Culturaltainment, the Chinese wine and entertainment group, has surged 26.7 per cent to HK$2.23 on its resumption of trading. While suspended it announced the 51.5 per cent acquisition of a Korean integrated resort holding company. It also announced a major connected share subscription. Both deals are pending shareholder approval.

2:05pm: The Hang Seng Index slips to 24,009.81, down 0.04 per cent or 8.99 points. The H-shares index goes to 11,058.92, down 0.20 per cent or 22.00 points. 

2:05pm: The Shanghai Composite Index moves to 3,962.34, up 7.78 points or 0.20 per cent. The CSI300 large cap index trades at 4,077.98, up 2.52 points or 0.06 per cent. 

2:05pm: The Shenzhen Composite Index is trading at 2,304.96, up 6.17 points or 0.27 per cent. The ChiNext slides to 2,671.35, down 12.90 points or 0.48 per cent.

1:21pm: Lenovo Group has extended its losses today, dropping 3.9 per cent to HK$7.40, its lowest share price in around two years. Click to enlarge the below view against the Hang Seng. 

After releasing dire interim results which saw profits halved, the computer manufacturer has said it will embark on an extensive restructure and layoffs which will hit second half numbers but reduce the company’s cost base going forward.

1:02pm: The Hang Seng Index begins the afternoon at 24,057.10, up 0.16 per cent or 38.30 points today. The H-shares index opens at 11,098.61, up 0.16 per cent or 17.69 points. 

1:02pm: The Shanghai Composite Index stands just below a milestone at 3,987.57, up 33.01 points or 0.83 per cent. The CSI300 large cap index trades at 4,098.642, up 23.18 points or 0.57 per cent. 

1:02pm: The Shenzhen Composite Index is trading at 2,330.16, up 31.36 points or 1.36 per cent. The ChiNext Price Index has lifted to 2,711.53, up 27.27 points or 1.02 per cent.

12:35pm: The Hang Seng Index (orange) and H-shares index (purple) from opening to midsession today – click to enlarge.

12:03pm: The Hang Seng Index closed its morning trading at 24,062.26, up 0.18 per cent or 43.46 points. The China Enterprises Index (H-share index) lifts 0.11 per cent, or 11.68 points, to 11,092.60. 

12:00pm: China indices at midsession today: the Shanghai Composite (orange), Shenzhen Composite (green), CSI300 (purple) and the generally more volatile ChiNext (blue). Click to enlarge. 

12:00pm: Tianjin Port has slid 3.68 per cent to HK$1.57 on its resumption of Hong Kong trading, while lifting 0.51 per cent in Shanghai to regain a fraction of yesterday’s 2.14 per cent loss.

Overnight, the port operator announced that the massive warehouse explosions in its home city would not cause significant loss for the group.

11:37am: The Shenzhen Composite Index goes up 1.22 per cent, or 28.10 points to 2,326.90 at the close of morning trade. The NASDAQ-style ChiNext Price Index gains 0.84 per cent, or 22.49 points at 2,706.74. 

11:34am: The Shanghai Composite Index closed its morning session at 3,987.57 points, up 0.835 per cent, or 33.01 points. The CSI300 index of Shanghai-Shenzhen large cap stocks adds 0.569 per cent or 23.18 points to 4,098.64. 

11:24am: Citic’s raw materials and commodities companies are on a significant rally. Citic Dameng, which largely undertakes manganese mining and ore operations, is up 20.5 per cent to 94 HK cents. Citic Resources Holdings, which handles aluminium, coal, manganese and crude oil operations, gains 15 per cent to HK$1.67. 

Mining and agri-foods red chips are generally outperforming in Hong Kong, while oil H-shares Sinopec SSC and Shanghai Pechem are well up on their larger counterparts.

11:07am: Chinese airline stocks are ascending again in Hong Kong, after two days of free-fall followed by yesterday’s stabilisation. China Southern Airlines has lifted 5.71 per cent, though dipping 0.76 per cent in Shanghai, while Air China is up 3.71 per cent in Hong Kong and down 0.62 per cent on the mainland. 

China Eastern Airlines gains 3 per cent in Hong Kong and loses 2.24 per cent in China as investors are more circumspect with the company’s interim results due today.

11:03am: Yan Tat Group, which manufactures printed circuit boards, has halted trading in its stock after it leapt 60.5 per cent to HK$4.56 this morning.

11:03am: In early Hong Kong trading, several sectors have reversed course since yesterday. Casino stocks Galaxy Entertainment and Sands China are up ahead of the latter’s interim results today, while oil majors CNOOC, PetroChina and Sinopec are down as the price of crude slides. 

Tencent is the most traded stock in dollar terms but remains flat at HK$144.10 after its very healthy surge yesterday on positive interim results. Second in turnover is the conglomerate Citic, which lifts 5.14 per cent to 14.74 to lead the Hang Seng gainers by almost 3 percentage points.

10:46am: BMI Research on how yuan devaluation hurt the energy and infrastructure sector: 

“The biggest impact of the recent yuan devaluation on China's renewable industry will be felt in the country's solar manufacturing segment, where vast overcapacity has already depressed solar panel prices significantly - making Chinese panels the most competitive in the world.

The devaluation will further boost their competitiveness in international renewable energy markets, given that costs to import Chinese made panels will fall, having a positive impact on demand. 

Domestically, we believe the key risk to consider in the infrastructure sector from the yuan devaluation and future currency volatility would stem from the higher credit costs for companies (particularly real estate developers ) which have been raising funds through the is suance of foreign currency denominated bonds .

Overall, however, we believe the impact will remain limited, as other sub-segments of the industry such as transport infrastructure have largely been financed directly by the government and benefited domestic companies almost exclusively.”

Click on chart to enlarge.

 

10:36am: The Hang Seng Index stands at 24,032.89, up 0.06 per cent or 14.09 points. The H-share index is almost flat at 11,083.18, up 0.02 per cent or 2.26 points. 

10:36am: The Shanghai Composite Index moves to 3,963.94 point, up 0.24 per cent or 9.38 points. The CSI300 is stable at 4,077.76, up 0.06 per cent or 2.30 points. 

10:36am: The Shenzhen Composite Index trades at 2,316.58, up 0.77 per cent, or 17.78 points. The ChiNext slips to 2,694.33, up 0.38 per cent or 10.07 points.

10:25am: ING report on Tianjian blast:

“Estimates of the economic damage from the horrific blast in Tianjin, one of the world’s busiest ports, vary. We thought the monetary and fiscal policy stimulus already implemented and in the pipeline would make the economic damage from the stock market panic transitory. Activity postponed in July would materialize in August and the economy would remain on the 7 per cent GDP growth path it was on in the first half of 2015.

The economic hit from the Tianjin explosion will add to the hit from elevated financial market volatility triggered by the clumsy introduction of the exchange rate reform. Rather than snapping back from an unusually weak July, we now expect a second consecutive month of sluggish growth in August.

Bottom line: We are revising our third quarter GDP growth forecast to 6.7 per cent from 7.0 per cent and our fourth quarter forecast to 6.9 per cent from 7.0 per cent. These imply a revision to our full-year forecast to 6.9 per cent  from 7.0 per cent.” 

9:51am: DBS daily report: 

“China’s unanticipated devaluation on 11 Aug did not quite play out as         eve­ryone expected. The surprise was the appreciation in the basket of currencies that make up the DXY (USD) index. Many attributed the rise in the euro, Swiss Franc, British pound, and Canadian dollar to a rollback in Fed hike expectations after oil and commodity prices reacted negatively to weaker yuan. While the Japanese yen depreciated, its fall was nowhere near those in the rest of Asia.  

Overall, it felt like the Fed taper tantrums in 2013 where markets were selling emerging markets and buying developed markets. For some, this begs the ques­tion as to whether there will be a relief rally, like in 2013 when the Fed pushed out its decision to taper asset purchases to December from September. Here, most will be looking to the Fed Symposium at Jackson Hole on 27 August for clues.” 

Click on chart below to enlarge.

9:38am: Markit report on China devaluation jolts Asian credit markets:

“China’s currency devaluation pushed Asian credit markets wider earlier this week before the central bank intervened, stabilising the market. China’s sovereign 5-yr credit default swap (CDS) spread widened to two year highs earlier this week Markit iTraxx Asia Ex Japan IG index widened to 121bps, touching 2015 highs. But the yuan devaluation had little impact on China’s eurodollar and dim sum bond markets.

While the People’s exact intentions remain unknown, fear in credit markets, suggests that the bank’s decision was based on slowing economic growth for the world largest exporter. Concerns over slowing growth were exacerbated by recent data showing weak industrial production, investment, and retail sales; the effects of which would ripple across the Asian region.

China remains a highly leveraged nation, with total debt to GDP (which includes corporate and household debt) standing at 282 per cent. Any slowdown would certainly strain that figure, increasing sovereign debt risk.

Elsewhere in Asia, Malaysia’s CDS spread hit fresh four year highs as its currency took further beating. The ringgit had already lost over 10 per cent over the last three months against the US dollar. Finally, despite the People’s Bank of China’s comments to stabilise the yuan, Australia’s 5-yr CDS spread has remained at 52-week highs of 40bps. Both countries are major commodity exporters and their CDS spreads reflect China’s slowing growth which has dented appetite for global commodities." 

Click on charts below to enlarge.

9:36am: The Shenzhen Composite Index opens at 2,316.50, up 0.77 per cent, or 17.71 points. The NASDAQ-style ChiNext Price Index gains 1.27 per cent, or 34.04 points to open at 2,718.30.

9:35am: The Shanghai Composite Index opens the morning at 3,970.44 point, up 0.402 per cent, or 15.88 points on Thursay’s close. The CSI300 index of Shanghai-Shenzhen large cap stocks opens at 4,091.49, up 0.393 per cent or 16.03 points. 

9:34am: The Hang Seng Index opens at 24,065.21, up 0.19 per cent or 46.41 points. The China Enterprises Index (H-share index) opens at 11,135.34, up by 0.49 per cent or 54.42 points. 

9:28am: Shanghai Composite Index inches down 0.35 points to 3,954.21 at the preopening session. CSI300 Index loses 0.85 points at 4,074.61.

9:04am: HSBC head of EM FX strategty Paul Mackel said: 

“Uncertainty surrounding yuan forex policy is very high and the Asian currency complex will be very sensitive to abrupt yuan depreciation pressures. We have been pencilling in Asian currency weakness for some time but we have decided to raise most of our USD-Asia forecasts further. These changes were not entirely due to the People’s Bank of China’s new onshore yuan fixing mechanism. While there is still plenty of uncertainty surrounding the yuan and by extension other Asian currencies, in the near term, we do not expect China’s authorities to desire a much weaker yuan. 

The divergence of the US-China monetary policy cycle means we are likely to see some cyclical depreciation pressure for the yuan over the next few years, albeit more than we were initially thinking. We expect China to remain committed to its yuan internationalization efforts and longer term economic rebalancing goals.

Away from the yuan, there has been an apparent tolerance of local currency weakness. The Korean won, Taiwan dollar and Thai Baht stand out in this context given some push to use unconventional policies to encourage greater capital outflow. That said, we would also hesitate to pencil in too much depreciation in these currencies, given their large current account surpluses and how the respective central banks are likely to be on guard against rapid depreciation.”

Click on charts below to enlarge.

9:02am: The Hang Seng Index futures spot August contract slides 1.69 per cent or 406 points to 23,638 in the pre-opening session.  

8:56am: Six Shanghai listed A-share companies applied to resume trading on Friday while three companies will suspend trading in their stock. The number of suspended companies in Shanghai is 96, representing 8.96 per cent of the total.

In Shenzhen, 12 listed companies say they will resume trading on Friday, while one firm will suspend trading in their shares. Some 277 firms in Shenzhen are in voluntary suspension, accounting for about 16.37 per cent of total listed companies.

8:37am: The number of new brokerage accounts opened during last week hit a new record low at 265,400, down 22 per cent from a week earlier, data released by the official China Securities Depository and Clearing showed. 

8:11am: Yue Yuan Industrial Holdings, the world’s largest branded athletic and casual footwear maker, posted a 4.3 per cent year-on-year fall in recurring operating profit to US$208.8 million in the year’s fist six months, which excluded one-off items like asset impairment losses, a provision for its mainland employees’ benefit, and derivative financial instruments fair value changes. 

The profit decline was largely due to higher selling, distribution and administration expenses. The company’s share price has underperformed the Hang Seng Index year-to-date. Click below to enlarge the chart. 

8:08am: China National Building Material, the nation’s largest cement producer, said late Thursday it expected to post a 50 to 60 per cent drop in net profit for the year’s first six months, from 1.8 billion yuan in the year-earlier period.

It cited a significant slow-down in cement demand growth, severe industry over-capacity for lower cement prices and its profit. The company’s share price has substantially underperformed the Hang Seng Index in the past three months. Click below to enlarge the chart.  

8:04am: Sands China (orange), a developer and operator of resorts and casinos in Macao, will announce its interim result today. The company closed down 3.179 per cent on Thursday at HK$33.5.

Its share price underperformed the Hang Seng Index (purple) from May to June, but it has outperformed the index since July when Macao’s gaming season kicked off.  Click on chart to enlarge.

 

8:02am: Datang International Power Generation (orange), one of China’s five largest state-owned power producers, will announce its interim result today.

The company closed up 0.559 per cent on Thursday at HK$3.36. Its share price outperformed the Hang Seng Index (purple) in May, but it has since underperformed the index. Click on chart to enlarge.

7:58am: China Eastern Airlines Corporation (orange), the country's second largest carrier by passenger numbers, is going to announce its interim result today.

Its share price largely outperformed the Hang Seng Index (purple) from May to August despite the market rout in early July and recent yuan devaluation. The company closed up 1.331 per cent on Thursday at HK$5.33.  Click on chart to enlarge.

7:56am: China Vanke (orange), the largest residential property developer in China, is going to announce its interim result today.

Its share price underperformed the Hang Seng Index (purple) in late June but it bounced back quickly and has outperformed the index since early July. The company closed up 0.541 per cent on Thursday at HK$18.6. Click on chart below to enlarge.

7:54am: Hong Kong’s top five stocks by turnover yesterday: Tencent Holdings (orange) up 6.82 per cent to HK$144.10 with turnover of HK$5.945 billion; Hong Kong Exchanges and Clearing (purple) down 0.58 per cent to HK$205.80; Bank of China (green) down 0.73 per cent to HK$4.10; Ping An Insurance (blue) down 0.12 per cent to HK$43.40; China Mobile (red) down 1.25 per cent to HK$98.95. Click to enlarge.

7:52am: Yesterday, the Hang Seng Index (orange) closed up 0.43 per cent or 102.78 points on 24,018.80, while the H-shares index (purple) closed up 0.35 per cent or 38.13 points on 11,080.92. Click to enlarge.

7:50am: Onshore spot yuan closed at 6.3982 Thursday, compared with the mid price of 6.4010 set by the PBoC in the morning.