China, Hong Kong stocks fall on oil price dive, weaker yuan

By: | Updated: March 9, 2017 11:22 AM

Benchmark stock indexes in China and Hong Kong fell on Thursday as a plunge in oil prices weighed on energy sector shares, and as global investors turned cautious ahead of a widely expected hike in US interest rates next week.

In Hong Kong, the Hang Seng index dropped 1.0 percent to 23,549.11, while the Hong Kong China Enterprises Index lost 1.4 percent to 10,139.89. (Reuters)

Benchmark stock indexes in China and Hong Kong fell on Thursday as a plunge in oil prices weighed on energy sector shares, and as global investors turned cautious ahead of a widely expected hike in U.S. interest rates next week. Renewed weakness in the yuan currency also dampened confidence, though China’s state banks stepped into the market to keep the currency from falling too fast. China’s blue-chip CSI300 index fell 0.8 percent to 3,422.98 points by the lunch break, while the Shanghai Composite Index lost 0.9 percent to 3,213.16. In Hong Kong, the Hang Seng index dropped 1.0 percent to 23,549.11, while the Hong Kong China Enterprises Index lost 1.4 percent to 10,139.89.

Shares fell across the board in China and Hong Kong, with the energy sector leading the decline in both markets, after crude prices plunged over 5 percent overnight on a spike in U.S. oil stockpiles.

The yuan was poised to fall against the dollar for the third straight day, touching the lowest level in almost two months as the dollar strengthens on U.S. rate hike views.

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Weaker-than-expected consumer inflation data out of China also added to the nervous mood, though producer price inflation raced to a near nine-year high, suggesting higher profits for firms ranging from miners and steel mills to oil refiners.

China’s producer price index (PPP) unexpectedly jumped 7.8 percent in February from a year earlier, while consumer inflation slowed to 0.8 percent due to lower food prices, marking its slowest pace since January 2015.

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“The lower-than-expected CPI data means overall demand remains weak, and the (economic) recovery is fragile,” said Shen Weizheng, Shanghai-based fund manager at Ivy Capital.

He believes that a robust rally in China shares since mid-January is likely coming to an end.

Trade date on Wednesday showed China’s February exports unexpectedly fell, but import growth was much stronger than expected, though economists cautioned the figures were likely distorted by the timing of the long Lunar New Year holiday.

Dutch asset manager Robeco said it remains bullish on Chinese equities this year, saying the economic recovery is being driven by improving fundamentals.

But Hong Kong shares will perform better than their mainland peers due to strong southbound investment flows and their relatively attractive valuations, the asset manager said.

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