Comments
Chinese stocks fell on Wednesday morning, on investor disillusionment over MSCI’s decision not to include mainland stocks into its global index and ahead of a tidal wave of new listings.
US index publisher MSCI Inc said it would hold off including China-listed shares into its emerging market index due to quota, liquidity and ownership issues, but will work with Chinese regulators toward an eventual inclusion.
The news triggered an early-morning sell-off, knocking the main indexes down more than 2 per cent at one point, but an ensuing burst of fresh buying helped stocks recover most of their losses.
By midday, both the CSI300 Index index and the Shanghai Composite Index were down only 0.5 per cent, after managing to nudge into positive territory earlier.
Shenzhen stocks were strong, on expectation that Beijing would accelerate reforms to allow easier foreign access to the city’s bourse.
Goldman Sachs pointed out that restricted access to Shenzhen-listed stocks for overseas investors was a key obstacle to overcome before MSCI includes Chinese stocks into its indexes.
Hong Kong stocks were also firmer, as some analysts viewed MSCI’s thumbs-down on mainland stocks as being positive to Hong Kong shares.
A damper mood on the mainland was partly countered by a 44 per cent debut surge in shares of energy giant China National Nuclear Power Co Ltd (CNNPC).
But a score of mainland blue chips previously identified by HSBC as potentially being the biggest beneficiaries from an MSCI inclusion, were hit hard.
CRRC Corp Ltd slumped 8.3 per cent, China Railway Group tumbled 4.4 per cent, Bank of China fell 3 per cent and Bank of Communications was down 3.2 per cent.
The CSI300 banking index fell 1.5 per cent. The sector had a strong rally recently as investors bet banking shares would benefit the most from an inclusion into MSCI indexes.
“This time, China stocks are not included. But they will be sooner or later,’’ Shenwan Hongyuan Securities Co said in a research note.
“The result is within market expectations, so we think the market can digest the news in a rational manner.’’
The view was echoed by UBS strategist Steve Yang, who said that despite MSCI’s decision, internationalisation of China’s stock market had already started, as “an increasing number of overseas funds have already considered including them in their portfolios.’’
At the end of the morning session, the CSI300 stood at 5,291.99 points, while the SSEC traded at 5,090.71 points.
The Hang Seng index added 0.2 per cent to 27,045.50 points and the Hong Kong China Enterprises Index lost 0.2 per cent to 13,837.19.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.