Hong Kong and China shares ended a rough November on a low note on Wednesday, with comments by a Chinese central bank adviser dashing hopes of monetary policy easing soon. The Hang Seng Index closed down 1.5 percent to 17,689.4 on the day and lost 9.4 percent for the month. It had surged almost 13 percent in October after slumping 21.5 percent in the third quarter.
The Shanghai Composite Index slumped to its worst day since August 8, finishing down 3.3 percent as A-share turnover spiked to its highest in about two weeks. The benchmark lost 5.5 percent in November. On Wednesday, China's top banks and insurers were among the top drags on the benchmark indices. The mainland's top bank, Industrial and Commercial Bank of China, lost about 2 percent in Hong Kong and 1 percent in Shanghai.
At an investment seminar in Beijing, Chinese central bank adviser Xia Bin reiterated that it would "fine tune" its "prudent" monetary policy instead of announcing an outright shift, adding that curbs on the property market will be maintained. His comments came a day before the scheduled release of Chinese manufacturing data for November, with investors edgy after preliminary indications last week showed that industrial activity in Asia's largest economy shrank the most since early 2009.
Recent gains in Chinese-related stocks have been rooted in widespread expectations China would ease the banks' reserve requirements, but Xia's statement "seems to put a different spin," said a Hong Kong-based trader at an American brokerage. A series of negative reports spooked investors. On Tuesday, UBS and Citigroup cut their growth forecasts for the world's second-largest economy. On Wednesday, analysts at Shenyin & Wanguo, a top Chinese brokerage, forecast that annual export growth is likely to slow to 7.7 percent in November, roughly half of October's rate of growth.
The China Enterprises Index of the top mainland firms listed in Hong Kong lost 2.1 percent on the day and 9.6 percent on the month. Turnover in Hong Kong was its highest since November 3, with a spike of about HK$10 billion just in the last 15 minutes of trading. The surge stemmed largely from index funds making portfolio adjustments as a result of changes to MSCI indices, effective after Wednesday's close.
Chinese sportswear brand, Li Ning, which is being removed from the MSCI China index, slumped 7.2 percent in volume more than 15 times its 30-day average. Shanghai Lujiazui Finance & Trade Zone Development Co Ltd , another stock being removed, lost the maximum-allowed 10 percent in Shanghai in almost 18 times its 30-day average volume.
Losses in this B-share stock contributed to the 6 percent slide on the Shanghai B-share index, a dollar-denominated, illiquid market dominated by foreign investors and is highly speculative. Bucking the losing trend was Jiangsu Phoenix Publishing & Media Corp Ltd, which ended up almost 35 percent on its listing debut in Shanghai on pent up demand for quality new listings. In Hong Kong, Italian fashion house Prada SpA rose 2.7 percent in volumes exceeding twice its 30-day average after posting strong growth in third quarter profit despite a global economic downturn.