Hong Kong and China shares slipped on Wednesday as mainland insurers plunged, underscoring investors' reluctance to hold stocks in companies that post weak interim earnings in a fragile market environment. Earnings remain in focus with prominent mainland companies such as CNOOC Ltd and China Unicom Ltd reporting better than expected interim results after trading hours, with markets still struggling to recover from the turmoil of early August.
"The money that remains in the market is short-term and especially nervous," said Larry Jiang, chief investment strategist at Guotai Junan Securities in Hong Kong. "In the absence of any policy news, downgrades of any sorts could see a pronounced impact on stock prices.
The Hang Seng ended down 2.1 percent at 19,466.8 points, largely on account of a 11.6 percent slump in China Life Insurance, which reported weaker than expected earnings, which were hurt by sluggish investment returns from stock investments in the mainland. The world's largest insurer by market value suffered its biggest drop in a day since October 2008, plunging the world's largest insurer by market value to its lowest levels since February 2009.
Turnover on the Hong Kong bourse was lower than its 20-day average at $9.7 billion on Wednesday, of which nearly $1 billion came from a single bulk deal struck at Tuesday's close in Ping An Insurance. A trader at a large Asian brokerage said 120 million Ping An H-shares, representing 3.8 percent of the company's listed shares, were sold at HK$64.85 each.
Warren Buffett-backed Chinese automaker BYD Co Ltd continued to fall for a second day. It sank 8.3 percent, extending a Tuesday's 14 percent slump after the company reported an 89 percent plunge in first-half net income and warned of a possible loss in the third quarter. Insurers also dragged the Shanghai Composite Index into the red, as it cut early gains to finish down 0.5 percent at 2,541.1 points with A-share turnover about 16 percent below its 20-day average.
All insurers listed on the Shanghai and Shenzhen market slipped, with China Life tumbling 3.3 percent and China Pacific Insurance (Group) losing 1.4 percent. "Short-term speculation now dominates the market. The high-opening of today's market attracted profit-taking in many sectors," said Zheng Weigang, analyst at Shanghai Securities, adding that liquidity remained tight.
Analysts said mainland stock markets were likely to face strong pressures from limited liquidity, especially after Liu Mingkang, chairman of the China Banking Regulatory Commission, reaffirmed a ban on bank loans for stock investment. But expectations of no immediate change to monetary policy should cap a sharp fall in the Shanghai benchmark, keeping it from breaking through the previous bottom of 2,437 points.
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