Onshore Chinese shares slid to a seven-week low and weighed on Hong Kong stocks on Tuesday after state media reported that housing market curbs will remain, raising fears that the ongoing party congress will spawn little change in economic policies.
Several news outlets reported that China's housing minister told reporters on Monday on the sidelines of the 18th Communist Party congress meeting, which ends on Wednesday, that he does not expect any loosening of the sector's restrictions. Turnover in Hong Kong rose more than 13 percent from Monday, but was still some 8 percent below the 30-day average.
The Hang Seng Index ended down 1.1 percent at 21,188.7. The China Enterprises Index of the top Chinese listings in Hong Kong dived 2 percent. Tuesday's losses took both indices to their lowest closes since mid-October. In the mainland, the CSI300 Index of the largest Shanghai and Shenzhen listings sank 1.8 percent. The Shanghai Composite Index fell 1.5 percent. Both indices ended at their lowest since late September.
The China Enterprises Index, or the H-share index, has shed 5.6 percent from a November 2 high. It had surged 14 percent in September and October, ranking among the top performing indices in those two months. Since November 2, there's been a 4.1 percent loss on the CSI300 Index and a 3.3 percent slide on the Shanghai Composite. The H-share underperformance has moved the Hang Seng Index A/H premium index back to near parity.
It is now at 99.9, the highest since October 17 after having traded below 100 for more than three weeks. This suggests the premium that onshore markets typically trade over offshore peers could return if H-shares continue to underperform A-shares. Shares of Chinese oil giants were put on the defensive due to falling oil prices. Chinese media reported on Tuesday that Beijing could cut gasoline and diesel prices in the mainland for a fourth time this year, perhaps as soon as Wednesday.
In Hong Kong, China Petroleum and Chemical (Sinopec) Corp lost 3 percent, while CNOOC shed 0.9 percent and Petrochina fell 1.9 percent. On Tuesday, growth-sensitive sectors whose performance is seen linked to the Chinese property sector suffered the brunt of the losses after the state-run China Daily newspaper reported the country's housing minister as also saying that Beijing is "actively studying" expanding property tax beyond Chongqing and Shanghai.
Chinese railway and infrastructure-related counters, which led a rally in September and October, trimmed 2012 gains. China Railway Group dived 6.2 percent from Monday's near 19-month high in Hong Kong. It is still up 69 percent this year. The Shanghai property sub-index was down 2.1 percent on Tuesday, with Poly Real Estate off 1.4 percent. Shenzhen-listed China Vanke shed 2.2 percent.
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