April 7, 2016 / 5:01 AM / 2 years ago

China stocks weaken ahead of March data releases; Hong Kong flat

* CSI300 -0.8 pct; SSEC -0.8 pct; HSI flat

* Investors await China March data to assess economic health

* ZTE shares slump in Hong Kong after trading resumes

SHANGHAI, April 7 (Reuters) - China stocks weakened on Thursday morning, as investors awaited a slew of Chinese economic data and remained cautious due to signs of increasing default risks in the country’s corporate bond market.

Both the blue-chip CSI300 index and the Shanghai Composite Index were down 0.8 percent at the midday break, to 3,231.45 points and 3,027.47 points respectively.

In Hong Kong, the Hang Seng index was flat, while the Hong Kong China Enterprises Index dipped 0.8 percent.

Over the next week, China will release some key economic data for March. A Reuters poll showed that China’s exports likely returned to growth for the first time in nine months in March while the pace of bank lending may have picked up.

Other data that will be released include China’s forex reserves, inflation and money supply.

“These data will be closely watched by investors who are looking for fresh evidence that the economy is stabilizing,” said Zeng Yan, analyst at Zhongtai Securities in Shandong.

Adding to investor caution on Thursday were signs of more troubles in China’s debt market, as state-owned Chinacoal Group Shanxi Huayu Energy failed to make a payment on bonds worth 600 million yuan ($92.6 million).

Underscoring increasing stress, China’s top planning agency has ordered issuers of so-called enterprise bonds and their underwriters to assess the risks of default and report back to the government as part of a nationwide campaign to limit systemic financial risk.

“Potential default threatens to push up borrowing costs, and is negative to stocks as well,” Zeng said.

While shares in China fell across the board, sectors in Hong Kong including IT and utilities managed to stay positive.

Hong Kong-listed shares of Chinese telecom equipment maker ZTE Corp tumbled nearly 10 percent as trading resumed for the first time since the U.S. Commerce Department imposed export restrictions on the firm last month for allegedly violating sanctions against Iran.

But ZTE’s Shenzhen-listed shares edged up 0.9 percent.

Reporting by Samuel Shen and Pete Sweeney; Editing by Richard Borsuk

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