China shares test 4-year lows, then pare losses
Hong Kong, June 25, 2013
China shares tested 4-1/2-year lows early on Tuesday, then pared hefty losses on hopes that authorities would address recent market turmoil - but no moves were announced.
Traders pinned their hopes on a press conference called in Shanghai by the central bank's branch there. At it, the branch's deputy chief blamed a spike in interbank market rates on seasonal factors, suggesting monetary authorities have no plans to veer from their previously stated policy position.
Given no new signal on policy, some traders worry that China shares could tumble again when the market opens on Wednesday.
On Tuesday, the CSI300 of the leading Shanghai and Shenzhen listings ended down 0.3 percent, while the Shanghai Composite Index slipped 0.2 percent. Earlier, they were down by as much as 6 and 5 percent at their respective lowest levels since early 2009.
The CSI300 has tumbled 22 percent from highs in February and its 14-day relative strength index is now 17.2, suggesting the benchmark is at its most technically oversold levels since the index's inception in 2005.
In Hong Kong, the Hang Seng Index reversed midday losses of 1.4 percent to end up 0.2 percent, while the China Enterprises Index of the top Chinese listings in Hong Kong shed 0.8 percent.
Shanghai volume was some 43 percent above its average in the past 20 sessions. At $12 billion, Hong Kong turnover was the second highest in three months, although short selling stayed high, accounting for 12.1 percent of total turnover, versus a historical 8 percent.
Hong Hao, chief strategist at Bank of Communication International Securities, said "it does not look like they (Chinese monetary authorities) are going to be injecting any cash, so we could be looking at more losses tomorrow."
"This is a market in capitulation, it's not worth trying to catch a technical rebound," Hong added.
Despite sharp rebounds in the afternoon, some Chinese financial stocks were still down for the day in mainland. China Minsheng Bank, a mid-sized bank that borrows in the interbank market, ended down 0.8 percent in Shanghai after plunging almost 10 percent in early trade.
Minsheng's Hong Kong-listing reversed big early losses to finish 2.9 percent higher after news of the press conference spurred some short covering in the most beaten-down names in the last few sessions.
Other growth-sensitive sectors - from materials and energy to property - were broadly weaker, on fears that the jammed interbank market was affecting fund availability for companies.
Overnight and 7-day rates eased again on Tuesday after the central bank did not drain funds, but weighted-average rates of over 5.8 percent and 7.4 percent respectively were still well above long-run levels.
In Hong Kong, property developers Sunac China and Greentown China fell 5.2 and 8.6 percent respectively. China Coal tumbled 4.6 percent to its lowest since November 2008.
But technology counter FIH Mobile, which said it expects to return to profit for the first half of 2013, surged 8 percent in Hong Kong, spurring gains for peers such as AAC Technology, which rose 4.8 percent. - Reuters