Chinese H Shares Decline for Second Day as Rail Builders Retreat

(Bloomberg) -- Chinese stocks traded in Hong Kong fell for a second day as railway and construction companies declined following the conclusion of an infrastructure summit in Beijing.

The Hang Seng China Enterprises Index slid 0.5 percent to 10,383.14 at the close, with China Railway Construction Corp. and China Communications Construction Co. among the biggest losers. People’s Insurance Co. (Group) of China Ltd. was the gauge’s biggest gainer, advancing 1.2 percent after saying it’s planning an initial public offering in Shanghai to boost capital. The Shanghai Composite Index retreated 0.3 percent.

Chinese H Shares Decline for Second Day as Rail Builders Retreat

Infrastructure companies had risen in the run-up to the Belt and Road forum that concluded Monday, amid optimism they would benefit from President Xi Jinping’s initiative to deepen economic ties with countries across Eurasian trade routes. While Xi’s pledge of $78 billion in financing caught headlines, projects will face hurdles including navigating local politics in each partner nation. David Cui, a Bank of America Corp. strategist, doesn’t see meaningful opportunities for China over the next few years.

"Investors bid up related shares before the forum and are now selling down,” said Andrew Clarke, director of trading at Mirabaud Asia Ltd. in Hong Kong. "We’re seeing some profit taking and some rotational buying. Any profit from this initiative is still far away."

  • Meitu Inc. fell 9.1% to a three-month low after MSCI Inc. revised a decision to include the stock in its MSCI China Index. The company didn’t meet the free-float market cap requirement because the holdings of pre-initial public offering investors remain locked up, Instinet Pacific Services Ltd. analyst Darwin Hung wrote in a note on Wednesday.
  • 3SBio Inc. shares advanced 5.4% to the highest since January 2016 after the company said late Tuesday it won distribution rights to Eli Lilly & Co.’s insulin products in China. China International Capital Corp. raised its target price to HK$12.50 from HK$11.80 to reflect its optimistic view on the arrangement, analysts led by Bo Yu wrote in a Wednesday note.
  • Apart from People’s Insurance, insurers were among the biggest decliners on the Hang Seng China Enterprises Index. New China Life Insurance Co. was the gauge’s biggest loser, falling 2.2%, while China Life Insurance Co. dropped 1.4%. Both companies surged more than 7% last week.
  • Galaxy Entertainment Group Ltd. slid 2.3%, leading declines on the Hang Seng Index. SJM Holdings Ltd. dropped 2.1%. The sector lacks near-term positive catalysts, with second quarter gross gaming revenue on track for a 4 to 5 percent drop versus the previous quarter, Credit Suisse Group AG analysts including Kenneth Fong wrote in a note on Wednesday.
  • Cathay Pacific Airways Ltd. jumped 4.9%, its biggest advance in more than a year, to lead gains on the Hang Seng Index. The company held its annual general meeting Wednesday, during which Chairman John Slosar told shareholders fuel-hedging losses will wane and be "pretty much gone" in 18 months, the South China Morning Post reported. Shares dropped to a three-month low on Tuesday after MSCI Inc. said it will remove the company’s stock from the MSCI Hong Kong Index.
  • China Communications Construction dropped 2%, while China Railway Construction retreated 0.9%. Both companies gained more than 3.3% last week. China Railway Group Ltd. lost 1.1%.
  • People’s Insurance advanced 1.2% to the highest since March 23 after unveiling its plan for an IPO on the mainland. An A-share listing may raise up to 14 billion yuan ($2 billion) at a higher valuation than the firm’s Hong Kong-traded shares, according to Sanford C. Bernstein & Co.