Shanghai stocks inched up on Friday but looked set for their biggest weekly loss of the year as tighter regulatory scrutiny and fears of an economic slowdown dampened investors’ risk appetite. Interest in stocks linked to the new Xiongan Economic Zone waned sharply, but some steelmakers gained despite the launch of a U.S. trade probe against China and other exporters of cheap metal. The move had been long expected.
The Shanghai Composite Index edged up 0.1 percent to 3,174.40 points by the lunch break but was poised to slide 2.2 for the week, its worst weekly performance since mid-December. The blue-chip CSI300 index rose 0.2 percent, to 3,467.25 points, and looked set to fall 0.5 percent for the week.
Concerns about tighter liquidity have surged as Beijing intensifies its battle against speculative trading and riskier financial practices. Top securities regulator Liu Shiyu last weekend urged stock exchanges to “brandish their sword” and punish market misbehaviours “with no mercy”.
China’s banking regulator has put out a slew of policy directives in recent weeks aimed at lenders’ shadow banking business and risk management, while the insurance regulator on Thursday called on insurance companies to strengthen supervision of operations and investment activities and correct market disorder.
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UBS strategist Gao Ting also attributed weak sentiment to profit-taking in Xiongan-related stocks, and “worries about growth peaking and deceleration of corporate profits.”
Despite a stronger-than-expected first quarter, China’s economic growth is expected to slow to 6.5 percent for the full year and weaken further to 6.2 percent in 2018, as the government seeks to cool the property sector and temper credit growth to contain risks from a dangerous build-up of debt, a Reuters poll showed.
On Friday, Xiongan-related stocks, including building materials maker BBMG, developer China Fortune Land and Tianwei Baobian Electric tumbled after a senior government official warned against speculation in property and stocks.
In Hong Kong, the Hang Seng index added 0.1 percent to 24,075.16 points, while the Hong Kong China Enterprises Index gained 0.1 percent to 10,061.45.
The market steadied in line with global markets, which were supported by bets on strong U.S. earnings and tax reform, but gains were capped by caution ahead of the first round of French presidential elections on Sunday and tensions over North Korea.
(Samuel Shen and John Ruwitch)