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China stocks fall slightly after Beijing adds curbs on credit card usage

China stocks fall slightly after Beijing adds curbs on credit card usage

Originally published at the South China Morning Post on February 3, 2016.

China stocks fell slightly after Beijing added new restrictions on the use of credit cards by mainland Chinese to buy insurance policies overseas, triggering fears of more capital control measures.

The Shanghai Composite index ended the afternoon session lower by 0.38 per cent or 10.32 points at 2,739.25, while the CSI 300 index for large cap stocks in Shanghai and Shenzhen fell 0.43 per cent or 12.69 points to 2,948.64.

In Shenzhen, the markets dipped in the morning before rallying in the afternoon. At the end of the trading session, the Shenzhen Composite index gained 0.47 per cent or 8.11 points to 1,737.20 while the Nasdaq-style ChiNext index increased by 0.73 per cent or 15.23 points to 2,090.51.

Analysts said that UnionPay’s new policy - capping overseas insurance spending at US$5,000 from Thursday onwards - led to the slump in the mainland markets.

“The UnionPay cap on overseas insurance payment has led to panic selling as many would fear this policy would be sort of a capital control,” said Louis Tse Ming-kwong, director of VC Brokerage.

“We do not know if the authority would expand the curbs on outflows such as adding some other restrictions on overseas spending, investment or take over back door listings in Hong Kong.”

Ivan Li, equities analyst at Tung Shing Securities, echoed Tse’s sentiments and said that insurance companies were most affected by the policy, which he called a tool for Beijing to stop capital outflows from the country. He added that the release of positive services sector data from China’s Caixin helped cushion the market slightly, but not enough to offset the downturn.

The Caixin PMI for January rose to 52.4, up from December’s 50.2.

“The service PMI has been pretty good (but) at the current level the service sector is still too small to become a new (economic) driver,” Li said, adding he expects the mainland markets to remain flat for the remainder of the week with the Lunar New Year holidays coming up.

The A Share market saw more losses than gains at the end of the trading session. Those leading the losses include Yanzhou Coal Mining Company, falling about 3.14 per cent to 8.32 yuan, Anhui Expressway, dropping about 2.46 per cent to 13.49 yuan, China Pacific Insurance Group, shedding about 2.19 per cent to 22.78 yuan, and Chongqing Iron and Steel Company, losing about 1.96 per cent to 2.50 yuan.

A share stocks that performed well include Shenji Group Kunming Machine Tool Company, up about 9.99 per cent to 12.66 yuan, Dongjiang Environmental Company, rising about 3.06 per cent to 15.16 yuan, Air China, gaining about 2.74 per cent to 6.74 yuan and China International Marine Containers, increasing by about 2.60 per cent to 13.81 yuan.

Northbound trading in the mainland’s A Share market through the Shanghai-Hong Kong Stock Connect saw a turnover of about 3.81 billion yuan (HK$4.50 billion), higher than the approximately HK$2.61 billion turnover seen in the southbound trade.

Hong Kong stocks also closed lower, with the session dragged down by a plunge in oil prices overseas.

The Hang Seng Index closed 2.34 per cent or 455.25 points weaker at 18,991.59, while the H-share index dropped 2.49 per cent or 200.52 points to 7,858.31.

Stocks in China and Hong Kong have had a turbulent start to the year. The botched implementation of a circuit breaker forced Chinese markets to suspend trading for two of the first four trading days of 2016.

Shares in Shanghai and Shenzhen have been battered since by sharp sell-offs, with the major Shanghai index falling in January over 22 per cent in the month of January alone, wiping out all the gains it rang up in the whole of 2015 when it climbed to a 7-year peak before tumbling badly from mid-June.

With additional reporting by Enoch Yiu

Investment in China’s railway sector tipped to fall gradually

Investment in China’s railway sector tipped to fall gradually

Chinese currency is expected to devalue by this much

Chinese currency is expected to devalue by this much