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Hong Kong - China’s stocks fell for the first time in six days after the nation’s trade worsened and investors speculated government-backed funds were paring support for equities.
The Shanghai Composite Index halted its longest winning streak since October, falling as much as 3.2% as gauges of financial, industrial and technology companies slid. Exports slumped 25.4% in February in dollar terms from a year earlier, while imports declined for a 16th straight month. Industrial & Commercial Bank of China, long considered to be a target of state buying because of its large index weighting, retreated 1.6%.
The worse-than-expected decline in outbound shipments underscores the Communist Party’s challenge to support growth as capital flows out of the country and debt climbs to an unprecedented level.
Policy makers last weekend raised their target for money supply and said they will allow a record deficit to meet an economic expansion target of 6.5% to 7% for 2016. State-backed funds intervened to bolster the stock market last week ahead of annual policy meetings.
“The export data are very, very poor,” said Castor Pang, head of research with Core-Pacific Yamaichi Hong Kong.
“The huge decline doesn’t augur well for the stock market. The Shanghai Composite is facing strong resistance near the 3 000 level as people, not convinced with the reversal of a bear market, are willing to dump their holdings.”
The Shanghai Composite fell 1.7% to 2 847.71 as of 1:06 p.m. in Hong Kong, snapping a five-day, 7.8% advance. The gauge has lost 19% this year, the worst performance among global benchmark indexes. The Hang Seng China Enterprises Index slid 1.7%, while the Hang Seng Index declined 0.7%.
Exports fell at the fastest pace since May 2009, while imports dropped 13.8%, leaving a trade surplus of $32.6bn. The week-long Chinese New Year holidays fell in February this year, closing factories and curbing shipments.
"Hopes for a global rebound need to be tempered with numbers like these," said Frederic Neumann, co-head of Asian economic research at HSBC Holdings in Hong Kong. "It’s easy to blame Chinese New Year distortions, but there is a much deeper malaise that is becoming apparent in the numbers."
State support
Transportation companies led declines among a gauge of industrial shares. China International Marine Containers (Group) plunged 5.8%, while Air China dropped the most in a week. China Shipbuilding Industry slid 3.6%.
An index of financial companies declined 2.3% after surging 7.5% last week. State-backed funds bought primarily bank shares on Friday, while some local branches of the securities regulator asked listed companies, mutual funds and brokerages to stabilize the market during the meetings, according to two people with direct knowledge of the situation.
There is speculation "the government is getting out from the market," said Linus Yip, a Hong Kong-based strategist at First Shanghai Securities. "Market sentiment has not totally been rebuilt, so when the A-share market goes up there will be some selling pressure."
Statements from the National People’s Congress are underscoring the difficulty for policy makers to boost growth while also carrying out plans to make state-owned enterprises more efficient, according to Ken Peng, a strategist at Citigroup in Hong Kong.
"NPC euphoria was misplaced," Peng said. “Markets were hoping for both stimulus and reform, self-conflicting goals. We got neither."
