China stocks post longest losing streak on HK bourse link delay

Charles Li, Chief Executive Officer of Hong Kong Exchanges and Clearing Ltd

China’s stocks fell for a fifth day, posting the benchmark index’s longest losing streak this year, amid concern the delay to the start of the Hong Kong-Shanghai bourse link will sap demand for shares.
Citic Securities Co. and Haitong Securities Co., the nation’s biggest-listed brokerages, dropped more than 2 percent in Shanghai and Hong Kong. Hong Kong Exchanges & Clearing Ltd. plunged 4.7 percent after Charles Li, the chief executive officer of the bourse operator, said he had no idea when authorities will give the green light to proceed on the link. China Vanke Co., the largest developer, slumped by the most since July after profit missed some analysts’ estimates.
The Shanghai Composite Index (SHCOMP) slid 0.5 percent to 2,290.44 at the close, while Hong Kong’s Hang Seng China Enterprises Index (HSCEI) declined 0.8 percent. The Shanghai gauge has fallen 4.1 percent from this year’s high on Oct. 9 after authorities failed to give a start date for the link after announcing in April that it would start in six months’ time.
“The delay in the Shanghai-Hong Kong connect will impact the market in the near term as this means more funds won’t be flowing in soon,” said Mao Sheng, an analyst at Huaxi Securities Co. “Moreover, investors are feeling jittery about economic growth in the fourth quarter.”
The CSI 300 Index dropped 0.9 percent, led by financial companies. Hong Kong’s Hang Seng Index lost 0.7 percent, dragged down by Tencent Holdings Ltd. and casino operators.
The Shanghai Composite rallied 15 percent in the third quarter, wiping out this year’s losses, as the link, also dubbed the Hong Kong-Shanghai Connect, fueled fund inflows on expectations investors from Hong Kong and Shanghai would gain unprecedented access to each other’s shares. Trading volumes in Shanghai were 34 percent below the 30-day average, according to data compiled by Bloomberg.
HKEx, which surged 32 percent through last week since plans for the link were announced in April, fell 4.7 percent, the biggest drop since April 15.
Citic Securities and Haitong Securities were among the biggest losers in the Hang Seng China index, sliding at least 2.7 percent. In Shanghai, Haitong Securities and Citic Securities both dropped 2.8 percent.
“Any reversal in the expectation regarding the Connect program can set the market in reverse,” Hao Hong, Bocom International Holdings Co. China equity strategist, wrote in a note uesyerday.
HKEx is at the “completion stage” of preparation for the Shanghai-Hong Kong stock link, Li said in a conference call with reporters Sunday, declining to speculate on a timeframe for the start date.
“While the market will always appreciate advance notice, which we will strive to give, I’m not at this point stipulating any particular days,” Li said.
Chinese regulators need to address whether foreign investors will pay capital gains taxes on mainland shares before the link can begin, Mark Mobius, who oversees about USD40 billion as the executive chairman at Templeton Emerging Markets Group, said in an interview in Hong Kong.
Some traders are speculating pro-democracy protests in Hong Kong’s central business district could be part of the reason for the delay, said Jeffrey Chan, chairman of the Hong Kong Securities Association.
Tencent retreated 1.2 percent, while Galaxy Entertainment Group Ltd. tumbled 3.1 percent. Asia’s biggest listed Internet company and casino companies were cited as potential beneficiaries of the trading link.
WH Group Ltd. plunged 20 percent to the lowest level since its initial public offering in August after subsidiary Henan Shuanghui Investment & Development Co. reported a 16 percent drop in third-quarter profit. Henan Shuanghui tumbled 10 percent.
Vanke dropped 3.3 percent in Hong Kong and lost 3.4 percent in Shenzhen. The company reported 0.15 yuan earnings per share yesterday, compared with a 0.18 yuan estimate by Guotai Junan Securities Co. Credit Suisse Group AG cut forecasts for the year and lowered Vanke’s price forecast.
China’s economic growth will slow to 7.2 percent in the current quarter, down from the previous three months, as domestic demand weakens, Song Guoqing, an academic member of the People’s Bank of China monetary policy advisory committee, said at a forum in Beijing on Saturday.
The nation’s economy will probably expand 7.3 percent next year, Song said. That view contrasts with a prediction by Fan Jianping, chief economist at a state research institute, who said he expects 7 percent growth in 2015 unless the central government imposes stronger-than-expected stimulus measures. Weiyi Lim, Bloomberg