Hong Kong, mainland stocks surrender gains as concern about China’s banks outweighs Xiaomi, Alibaba rally and steady August economic data
- Hong Kong and China stocks post third straight month of gains in August despite declines on Monday
- Sentiment soured by new round of policy tightening aimed at highly-leveraged property developers, which could affect banks’ asset and loan quality
The stock markets in Hong Kong and mainland China gave up early gains and ended lower on Monday, with concern about the outlook for Chinese banks eclipsing optimism around technology stocks and upbeat economic data.
Both markets, however, posted a third straight month of gains in August, as investors welcomed reforms introduced by the Shenzhen Stock Exchange even as they digested US-China tensions. A dovish US Federal Reserve also helped push global markets higher.
The Hang Seng Index rose as much as 1.7 per cent in the morning session, before reversing to a 1 per cent decline and closing at 25,177.05. The benchmark gained 2.4 per cent this month, following a 0.7 per cent gain in July and a 6.4 per cent jump in June. The Hang Seng Tech Index, which tracks the 30 biggest technology companies listed in Hong Kong, fell 0.3 per cent, but ended the month 5.4 per cent higher.
On the mainland, the Shanghai Composite Index surrendered gains of as much as 1.1 per cent to close 0.2 per cent lower at 3,395.68. The benchmark added 2.6 per cent for the month, following a 10.9 per cent surge in July and a 4.6 per cent increase in June. The Shenzhen Component Index dipped 0.7 per cent, and the ChiNext Index of start-ups in Shenzhen dropped 1.1 per cent.
Sentiment in the A-share market soured during the day, as investors focused on a new round of policy tightening introduced by Beijing to guide China’s highly-leveraged property developers. These companies have been directed to cut down debt, as reported during earnings calls as well as by the Chinese press over the weekend.
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“Deleveraging by developers will reduce some bubbles in China’s housing market, which will damage Chinese banks’ asset quality and loan quality, as many developers are financed by bank loans,” said Alan Li, portfolio manager at Atta Capital.
