Chinas stock market fell on Wednesday, underperforming regional markets, in response to much weaker-than-expected Chinese export data and concern about high valuations for shares. The Shanghai Composite Index, which had rebounded 1.88 percent on Tuesday, slid 0.91 percent to close Wednesday at 2,139.025 points, near the days low of 2,133.141.
It lagged a rise of about 2 percent in Hong Kongs Hang Seng Index, which was boosted by a rally in financial stocks after Citigroup said it was profitable in the first two months of 2009. Losing Shanghai A shares outnumbered gainers by 554 to 355, as turnover in Shanghai A shares totalled 87.9 billion yuan ($12.9 billion), up from Tuesdays 69.0 billion yuan but below normal levels in the past month.
Chinas exports plunged a much sharper-than-expected 25.7 percent in February, shrinking the trade surplus to $4.84 billion from $39.1 billion in January, the government said on Wednesday. This was partly offset by strong investment data; urban investment in fixed assets such as roads, power plants and apartment buildings rose 26.5 percent in January and February from a year earlier, easily beating market forecasts of a 21.5 percent increase.
The investment figures boosted steel shares, with Wuhan Steel up 2.40 percent to 5.97 yuan. But the annual session of Chinas parliament looks set to end this week without major news on fresh policies to help the economy, and with data continuing to give a mixed outlook for a Chinese economic recovery, investors were reluctant to push many shares higher in the face of high valuations.
The average premium of Shanghai listed A shares over Hong Kong-listed H shares in the same companies was a large 53 percent late on Wednesday, though down from recent levels above 60 percent.
The official Shanghai Securities News reported on Wednesday that Hong Kong delegates at the parliament session had proposed letting Hong Kong and mainland China residents invest in each others stock markets directly. The long-discussed reform may not proceed any time soon; the report quoted an assistant governor of Chinas central bank as saying the proposal needed further study.
But the reform could help to shrink the valuation gap between the markets, so the report weighed on Chinese shares. "Market sentiment is cautious - the economic data this week wasnt very good, so the market lacks energy to rise and is likely to seek support at 2,000 points," which is widely seen as strong technical support, said Zhang Gang, analyst at Central China Securities.
Financial shares were soft on Wednesday despite a surge in banking stocks elsewhere in the region. Industrial & Commercial Bank of China edged down 0.54 percent to 3.70 yuan. Property shares were also weak, with Poly Real Estate down 3.57 percent to 19.74 yuan after saying it had won shareholder approval for a share placement plan of up to 8 billion yuan.
The January-February fixed asset investment data showed investment in real estate up just 1.0 percent during the period, after a 20.9 percent gain in all of 2008. China Shipping Developments A shares surged 3.69 percent to 10.41 yuan after it reported better-than-expected contract freight rates for 2009. That widened the premium to its H shares, which were up 1.74 percent to HK$6.43.