October 28, 2016 / 4:46 AM / 2 years ago

China stocks flat as financial shares gain on signs of improvement; HK down

* SSEC flat, CSI300 0.2 pct, HSI -0.4 pct

* China Oct manufacturing activity may have expanded mildly -poll

* China banking, brokerage shares up on signs of improvement

SHANGHAI, Oct 28 (Reuters) - China stocks were little changed on Friday morning, as investors, haunted by fears of persistent yuan depreciation and tighter liquidity, sifted through a slew of corporate earnings to assess China’s economic health.

Hong Kong shares followed Asian markets slower, amid concerns over money flowing out of emerging markets due to mounting expectations of a U.S. interest rate hike by the year-end.

China’s blue-chip CSI300 index rose 0.2 percent, to 3,350.82 points at the end of the morning session, while the Shanghai Composite Index was unchanged at 3,113.35 points.

The indexes are set to end the week up roughly 0.7 percent.

Earlier gains in the week were capped by signs that the recent economic recovery is shaky.

Profit growth in China’s industrial firms in September slowed sharply from a month ago as some key manufacturing sectors stumbled on weak activity and rising debt, official data showed on Thursday.

Easing fears of renewed slide in the economy, a Reuters poll showed that activity in China’s manufacturing sector may have shown mild expansion in October, adding to evidence of more stability.

Investors found some solace also in third-quarter results from banks and brokerages, pushing up the financial sector.

China Construction Bank Corp reported its bad loans declined for the third quarter, the first drop since 2012, signalling that a slide in asset quality at the country’s top state-owned commercial banks may be reaching a pause, and assuaging concerns of a debt crisis.

Brokerage shares also rose after most securities firms’ results signalled a turnaround, to positive year-on-year growth.

“Generally speaking, the market is relatively stable, as investors pin hopes on the success of state company reforms despite short-term risks from yuan depreciation and rising money market rates,” said Wu Kan, Shanghai-based head of equity trading at investment firm Shanshan Finance.

The yuan edged marginally off a six-year low on Friday as some Chinese banks judged that depreciation pressure on the yuan had ebbed temporarily.

In Hong Kong, both the Hang Seng index and the Hong Kong China Enterprises Index dropped 0.4 percent.

Samuel Shen and John Ruwitch; Editing by Simon Cameron-Moore

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