SHANGHAI, April 21 — Chinese shares headed for their biggest weekly loss of 2017, with increased regulatory scrutiny and a crackdown on leveraged trading sapping investor sentiment.
The Shanghai Composite Index was set for a 2.2 per cent tumble for the week, the most since mid-December, with mainland gauges of energy and materials companies leading the decline. Stocks that rose after China’s announcement of a new economic zone in Xiongan were among the worst performers. Hesteel Co, China Fortune Land Development Co. and Beijing Capital Co plunged at least 18 per cent for the week.
China’s securities regulator has stepped up criticism of what it called disruptive trading behaviour, with chief Liu Shiyu saying at the weekend the nation’s bourses should punish irregularities “without mercy.” The A-share gauge has been the world’s worst-performing equity market over the past five days, with trust companies said to have been ordered to cut exposure to the property sector and the Shanghai securities regulator demanding a crackdown on illegal futures trading.
“The downward trend remains intact as regulators will likely maintain their strict stance over financial scrutiny,” said Wu Kan, a Shanghai-based fund manager at Shanshan Finance Co. “The market can hardly avoid the impact from government policies.”
The ChiNext gauge of small-cap shares gained 0.3 percent at the midday break, paring a weekly decline to 1.7 per cent. In Hong Kong, the Hang Seng Index rose 0.1 per cent, trimming a weekly loss to 0.8 per cent. The Hang Seng China Enterprises Index climbed for a second day, adding 0.1 per cent. The Shanghai Composite edged 0.1 per cent higher for the day.
Materials and energy suffered most in the week, with gauges for both groups declining at least 3.5 per cent as investors turned defensive amid concerns that economic growth may have peaked. Hesteel fell 20 per cent, while Sinopec Oilfield Service Corp lost 4.8 per cent.
Beijing Originwater Technology Co jumped 5.2 per cent today in Shenzhen, among the top performers on the CSI 300, after saying yestersday that it’s not the target of a government lawsuit. Fufeng Group Ltd slumped 11.2 per cent in Hong Kong, the most since August 2015, after its placement of 140 million shares was priced at HK$5.55 each.
That’s a discount to yesterday’s close of HK$6. Kerry Properties Ltd slid as much as 9.4 per cent in Hong Kong, its steepest intraday decline since February 2009, after Bank of America Merrill Lynch analysts Fan Tso and Karl Choi cut the stock to underperform from neutral in a note today, saying that China’s luxury recovery may have muted earnings impact and is amply reflected in the stock’s price.
SM Pacific Technology Ltd. jumped 6.8 per cent. The company said in a stock exchange filing that net income rose to HK$736 million (RM416.58 million)in the first quarter from HK$133.8 million a year ago. The company’s strong earnings are mainly due to better margins, Huatai Research analyst Ken Hui wrote in a note, maintaining a buy rating and price target of HK$116. — Bloomberg