China and Hong Kong stocks sagged on Tuesday morning, extending losses after Monday’s slump, as investors worry about China’s economy and brace for a possible exit of Britain from the European Union.
Although some expect US index publisher MSCI to add Chinese shares to its emerging market index later in the global day, many believe any positive market impact will probably be limited in the near term given the lead time required for global funds to switch their asset allocations.
Both China’s blue-chip CSI300 index and the Shanghai Composite Index lost 0.3 per cent by the lunch break, to 3,058.70 points and 2,826.00 points, respectively. The indexes slumped 3 per cent on Monday.
Hong Kong shares also fell. The Hang Seng index lost 0.3 per cent, while the Hong Kong China Enterprises Index dipped 0.2 per cent.
Chinese economy
Trading remained sluggish in Shanghai as worries about China’s economy deepened after data showed growth in China’s fixed-asset investment slipped below 10 per cent for the first time since 2000 in January-May.
“You don’t see any convincing reason to buy stocks at the moment,” said Zeng Yan, strategist at Zhongtai Securities.
“Even if MSCI decides in favour of a China inclusion, it would still take at least six months for global fund managers to increase their China allocation. Short-term impact is limited.”
Brexit vote
Global investors are now concerned about the potential impact of Brexit with recent polling showing a swing in favour of a Britain exiting the European Union. The referendum is on June 23.
Most sectors in China fell on Tuesday morning, but financial shares firmed.
In Hong Kong, all main sectors declined.