China Stocks Close Near Two-Month Low as Energy Shares Decline

(Bloomberg) -- Chinese shares closed near their lowest level since early February as energy shares dropped and investors turned to companies whose earnings are less reliant on economic growth.

The Shanghai Composite Index was little changed at 3,172.10 at the close. PetroChina Co. was among oil companies that declined, while traditional Chinese medicine firm Yunnan Baiyao Group Co. jumped to a record as health-care shares climbed. The Hang Seng China Enterprises Index added 0.7 percent to 10,056.17.

The benchmark in Shanghai slipped 3.2 percent over the previous four sessions amid increased scrutiny of market speculation. Liu Shiyu, the country’s top securities regulator, said at the weekend China’s bourses should punish market irregularities “without mercy.”

“People are still pretty worried about financial scrutiny, and the market outlook will depend on the next steps of regulators,” said Li Bin, a Shanghai-based analyst with Capital Securities Co. Li said he expected the index to trade around 3,100 to 3,300 in the short term.

China Stocks Close Near Two-Month Low as Energy Shares Decline

The Hang Seng Index climbed 1 percent to 24,056.98.

  • PetroChina slipped 1.4% in Shanghai as a gauge of energy shares fell the most among 10 industry groups. After posting a third weekly gain on optimism OPEC will extend output curbs to ease a global glut, crude has closed down every day this week.
  • Yunnan Baiyao jumped 5.4% and Tasly Pharmaceutical Group Co. added 5% as a gauge of health-care stocks climbed to its highest since June 2015.
  • Luzhou Laojiao Co. rose 5.4% to lead consumer shares higher and Kweichow Moutai Co. added 2.4% as it traded at a record high. A gauge of consumer shares also climbed to its highest since June 2015.
  • China’s markets are starting to feel the heat from a campaign to cleanse the financial system of risk, said Hao Hong, chief strategist at Bocom International Holdings Co. in Hong Kong. “For now, it pays to stay cautious -- I don’t think the bearish trend will stop here,” he said. “We’re going to see the destruction of trades that rely on very high leverage.”
  • The Shanghai gauge has now gone 85 trading days without a loss of more than 1% on a closing basis, the longest stretch since the market’s infancy in 1992.
  • Lonking Holdings Ltd. added 5.2% in Hong Kong after dropping 15% in the previous three sessions. Weakness in March loader data may have triggered investor concerns on potentially deteriorating fundamentals, but the decline was mainly due to a high base in March 2016, Goldman Sachs Group Inc. wrote in a note.
  • Sunny Optical Technology Group Co. rose 4.7% to close at a record high after Citigroup Global Markets Inc. recommended buying the stock on optimism the smartphone market is improving.