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Chinese stocks tumble for fifth straight session as weak data weigh down market

CSI 300's sub-index for the consumer staples sector fell 0.8 per cent, the real estate index was down 1.2 per cent and healthcare sub-index lost 0.8 per cent. 


Devdiscourse News Desk Last Updated at 09-11-2018 14:58:11 IST China
Chinese stocks tumble for fifth straight session as weak data weigh down market

Chinese stocks fell nearly 1.5 per cent on Friday, posting their fifth straight session of declines, as the market was weighed down by a mix of weak data, worries over rising pressure on financial companies and concerns of a new board in Shanghai disrupting the already weak A-share market.

At the close, the Shanghai Composite index was down 1.4 per cent at 2,598.87. The blue-chip Shanghai Shenzhen CSI 300 index was also lower by 1.4 per cent.

CSI 300's sub-index for the consumer staples sector fell 0.8 per cent, the real estate index was down 1.2 per cent and healthcare sub-index lost 0.8 per cent.

CSI 300's financial sector sub-index dropped 2.2 per cent after the head of China's banking and insurance watchdog told banks on Thursday to allocate at least a third of their new loans to private companies and asked them not to withdraw loans from companies struggling to repay.

"Banks have undergone deleveraging for quite some time," said Cao Xuefeng, head of research at Huaxi Securities in Chengdu. "The market is worried that banks' non-performing loan ratios will go up if, on top of that, they need to lend more to businesses that are facing difficulties."

Some investors are staying on the sidelines, awaiting the next turn in the ongoing trade conflict between Beijing and Washington, said Zhang Gang, a Shanghai-based analyst at Central Securities. "There is still a lot of uncertainty, the impact of the tariffs has not been fully realised yet."

While October trade figures, made public on Thursday, came in above expectation, economists attributed the uptick to front-loading, as businesses raced to trade more ahead of additional U.S. tariffs scheduled for the turn of the year.

Two other sets of economic data led the market lower in the afternoon session. Producer inflation fell for the fourth straight month in October on cooling domestic demand and manufacturing activity. Meanwhile, car sales in China were also down for a fourth consecutive month, having dropped more than 11 per cent in October.

"The direction of the market will ultimately depend on the result of trade talks between China and the U.S., especially at the G20 meeting," Zhang added, referring to the planned meeting between Chinese President Xi Jinping and U.S. President Donald Trump at the summit in Argentina later this month.

Investors have been worried that the launch of a new board for tech companies this week, announced by Chinese President Xi Jinping on Monday, will disrupt the valuation structure of the market, said Cao. These concerns mounted after Fang Xinghai, deputy head of the securities regulator, said on Wednesday the regulator would quickly implement Xi's plan for a new board, Cao added.

"It could be difficult to push this through when the market is not doing well when confidence is lacking," said Zhang Qi, an analyst with Haitong Securities in Shanghai. "But to be fair, the authorities didn't say they will do it immediately. I think they will take it step-by-step."

The smaller Shenzhen index ended down 0.4 per cent and the start-up board ChiNext Composite index was weaker by 0.5 per cent.

So far this week, the Shanghai stock index and the CSI300 have both fallen 1.4 per cent. The two indices were down for every trading day this week.

As of 07:00 GMT, China's A-shares were trading at a premium of 18.1 per cent over the Hong Kong-listed H-shares.

(With inputs from agencies.)


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