China's stocks fall to 10-week low amid trade war fears and data showing slower exports growth


Declines on Chinese stocks resumed on Wednesday, sending the benchmark gauge to its lowest level in 10 weeks, as a looming trade war and slower-than-estimated export growth renewed concerns about the resilience of the economy.

The Shanghai Composite Index dropped 1.1 per cent, or 32.63 points, to 2,893.76 at the close on Wednesday, finishing at its lowest level since February 22. A measure of stocks in Shenzhen slid 0.7 per cent. Almost US$1 trillion in market capitalisation on mainland equities has been erased since its high in April, according to Bloomberg data. Hong Kong's Hang Seng Index sank to a six-week low.

The resumed decline in stocks followed an overnight rout in global markets amid fears that this week's high-stake trade talks between China and the US will fall apart. Adding to the sell-off was China's April trade data, with the 3.1 per cent export growth trailing the consensus estimate of an 8 per cent increase.

China's exports suffer surprise fall in April amid heightened trade war tensions with United States

Efforts by China's central bank to turn on the liquidity taps had little impact upon sentiment. The overnight repo rate on the interbank market, a gauge of funding availability, fell to a four-year low after the People's Bank of China unleashed 10 billion yuan (US$1.48 billion) through reverse repurchase agreements.

"For now, the central bank's liquidity net injection is symbolic and won't be done in a massive way, given the talks are still going on and haven't fallen apart completely," said Ken Chen Hao, a strategist at KGI Securities in Shanghai. "It simply wants to send a message that it will take action once the downside pressure on the economy is increasing. But if the negotiation really falls apart, it will have a pretty negative impact on China's economy in the long turn and will bring an end to the rally on stocks."

Agricultural and insurance companies led the pack of decliners. Chicken-breeder Shandong Minhe Animal Husbandry plunged by the 10 per cent daily limit for a second day to 30.90 yuan and pig-farming firm Wens Foodstuffs Group slumped 7.3 per cent to 34.64 yuan. Ping An Insurance Group shed 2.9 per cent to 78.78 yuan.

Kweichow Moutai, the world's most valuable liquor distiller, slipped 0.6 per cent to 884.40 yuan. It received an inquiry letter from the Shanghai Stock Exchange late Tuesday night, asking the tipple producer to explain why its state-run parent Kweichow Moutai Winery Group had established its own sales network on May 5. The move came after some investors complained the parent would take some of the profits away from the listed unit, hurting the interests of small shareholders.

In Hong Kong, the Hang Seng Index fell 1.2 per cent, or 359.82 points to 29,003.20, its lowest close since May 28. The Hang Seng China Enterprises Index, or the H-share gauge, lost 1.5 per cent.

Hong Kong Exchanges and Clearing, the operator of Asia's third-largest stock market, retreated 1.6 per cent to HK$261 after saying first-quarter net income increased 2 per cent from a year earlier.

China Everbright Water, a water treatment and sewage plant operator in Shenzhen, tumbled 11 per cent in first day trade in Hong Kong.

Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.


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