Hong Kong, mainland stocks inch up on data showing China’s consumption grew at faster clip than expected in June
- Pharmaceuticals rally after China’s plan to curb medicine prices is seen as less tough than feared
- Software-related stocks jump on excitement about approaching open of new tech board
Hong Kong and mainland stocks closed a bit higher, as data showed China’s retail sales grew at a faster clip than expected in June and news indicated that Beijing’s national expansion of a medicine-pricing programme will not be as tough as pharmaceuticals feared.
The Shanghai Composite Index closed up 0.4 per cent on Monday, at 2942.19, while the CSI 300 Index of large stocks traded in Shanghai and Shenzhen ended ahead 0.4 per cent at 3824.19.
In Hong Kong, where pharmaceutical companies were the day’s big winners, the Hang Seng Index closed up 0.29 per cent at 28,554.88, extending gains to a fifth straight day.
CSPC Pharmaceutical jumped 7 per cent to HK$13.46, while Sino Biopharmaceutical rose 5.5 per cent to HK$8.99.
Investors cheered news from China that a plan to keep the lid on drug prices will not be as tough as feared as it is expanded nationwide.
Social media and gaming giant Tencent gained 1.6 per cent, closing at HK$360.8. Insurer AIA gained 0.4 per cent to HK$85.8.
Linus Yip, chief strategist at First Shanghai Securities in Hong Kong, said he expects the Hang Seng and Shanghai Composite indexes to trade range-bound this week, with the former at 28,000 to 28,700 and the latter capped at 3,050 points.
On China, Yip said retail sales were a bright spot that overshadowed second-quarter GDP slowing to a low of 6.2 per cent – the lowest since records have been kept. Retail sales rose by 9.8 per cent, up from May’s reading of 8.6 per cent. That had been a big improvement on April’s 7.2 per cent growth, which was the lowest figure since May 2003.
“While the overall economy is no doubt in a slowdown, the bright spot was in June retail sales. It highlighted the need for further stimulus measures, as the stronger retail sales were bolstered by a slew of tax cut and fees reductions by Beijing earlier this year,” said Yip, referring to incentives given to consumers of new energy cars and home appliances.
Software-related stocks rose in China on positive sentiment about the coming tech board in Shanghai, which officially opens on July 22. The Shanghai’s Science and Technology board will be a Nasdaq-styled market for home grown technology.
Hitting the daily 10 per cent upside limit were Shanghai Wondertek Software, at 17.55 yuan, Digiwin Software, at 14.7 yuan, and Winning Health Technology, at 14.41 yuan.
But corporate profit warnings also unnerved China traders, casting a shadow on the coming earnings season.
Dong-E-E-Jiao and Han’s Laser Technology Industry Group both tumbled by the 10 per cent daily limit on the Shenzhen exchange after saying first-half profit may have fallen significantly.
Dong-E-E-Jiao, a maker of traditional Chinese medicine from donkey skins, slid to 35.42 yuan after saying profit probably fell as much as 79 per cent from a year earlier on destocking. Han’s Laser, once a favourite among foreign investors, sank to 32.45 yuan after saying profit for the first six months may have dropped as much as 65 per cent due to the downward cycle on the consumer electronics sector.
Meanwhile, Kweichow Moutai closed down 1 per cent, at 975.93 yuan, despite reporting that a preliminary audit showed the liquor giant’s net profit rose 26 per cent for the first half from a year ago to 19.9 billion yuan, while operating income rose 16.9 per cent and totalled 41.2 billion yuan.
The index heavyweight, known for its fiery liquor called baiju, is the first stock in China whose price shot above 1,000 yuan.
But in recent weeks, some foreign fund managers have been selling the stock, thinking it had become too expensive. It has risen 65 per cent year-to-date, and is trading at a forward price-to-earning ratio of 34 times.
Additional reporting by Zhang Shidong
