China shares posted a third-straight daily loss in weak Monday trading, flattening Hong Kong gains, after patchy economic data over the weekend spawned doubts that earnings will recover for Chinese companies. A flight to earnings safety prodded shares of Asia's third-largest insurer AIA Group to a record closing high in Hong Kong, where a litany of Chinese companies warned of declining profits over the weekend.
In the mainland, the CSI300 of the leading Shanghai and Shenzhen A-share listings ended down 0.6 percent, while the Shanghai Composite Index slipped 0.4 percent in the weakest bourse volume since Christmas Eve. The Hang Seng Index closed flat, surrendering gains it had at midday. The China Enterprises Index of the top Chinese listings in Hong Kong shed 0.4 percent. Turnover ranked fifth-lowest this year and was some 13 percent below its 20-day average.
Official data over the weekend showed China's consumer prices rose 3.2 percent in February from a year ago, the fastest pace in 10 months, while industrial production growth in the first two months of 2013 was the lowest since October 2012 - the starting point of China's nascent economic recovery. "It's still premature to predict what the central bank will do with this set of data, but it's difficult to draw any positive conclusions," said Hong Hao, chief equity strategist at Bank of Communication International Securities.
In a report dated last Friday, Citi strategists cited data provider EPFR as saying that China equity funds had a net outflow of $56 million in the week that ended March 6. That was the second straight period of net outflows after 24 consecutive weeks of inflows, according to the data. Hong said he is still advising clients not to take excessive risk at present. "We now know that both economic growth and the equities rally in December and January were driven by liquidity, we now need to see easier monetary policy converted into some kind of growth in the next few months," he said.
Illustrating concern about inflation cutting into margins, shares of snack maker Want China dived 4.3 percent from Friday's record closing high in Hong Kong, cutting the year's gains to 8.4 percent. Insurer AIA, though, climbed 1.6 percent to lift gains in 2013 to 13.6 percent. The Hang Seng Index is up 1.9 percent, while the China Enterprises Index is flat on the year. Yurun Food, one of a series of Hong Kong-listed companies that over the weekend warned of declining profitability, tumbled 7 percent to close at its lowest since December 12.
Mid-sized lenders were among the biggest drags on mainland benchmark indexes. China Minsheng Bank fell 3.2 percent from Friday's one-month closing high in Shanghai. Industrial Bank was also down 3.2 percent. The banking sector was further hurt by a China Business News report that quoted a vice director of the Chinese banking regulator as saying there are no plans to change the current 75 percent loan-to-deposit ratio cap. Comments from regulators at the National People's Congress last week had raised hopes of a policy change. On Monday, China Business News reported the official as also saying any rule adjustments would be aimed at containing risk.