December 12, 2016 / 9:50 AM / 2 years ago

China stocks sink to month low; Hong Kong also slips on Trump

* SSEC -2.5 pct; CSI300 -2.4 pct; HSI -1.4 pct

* Insurers pull back from stock markets

* Trump’s questioning of “one China” principle rattles HK mkt (Adds detail, quotes, context)

SHANGHAI, Dec 12 (Reuters) - China stocks suffered their biggest drop since June to hit a one-month low on Monday, as fresh regulatory curbs were put on trading by insurance companies and worries about incoming U.S. president Donald Trump’s China policy rattled investors.

The downbeat mood spread to Hong Kong, where investors were already cautious ahead of a likely U.S. interest rate increase this week.

In mainland markets, analysts said investors were spooked by an announcement by the country’s insurance regulator late on Friday that it had suspended Evergrande Life, the insurance arm of China Evergrande Group, from conducting stock market investments due to its speculative, frequent, high-volume trading.

The blue-chip CSI300 index fell 2.4 percent to 3,408.58 points, and the Shanghai Composite Index lost 2.5 percent to 3,152.47 points.

“The market dropped because several insurers are not allowed to buy stocks. This has changed investors’ expectations,” said David Dai, Shanghai-based investor director at Nanhai Fund Management Co.

Also late on Friday, Foresea Life Insurance, a unit of Baoneng, said that it would not further boost its stake in Gree Electric Appliances Inc of Zhuhai. Gree shares, which had surged by Forsea Life’s aggressive stake-building, plummeted more than 6 percent on Monday.

Other companies favoured by insurers, including China Vanke Co Ltd, China State Construction Engineering Corp Ltd and Poly Real Estate Group Co Ltd, also saw their shares tumble.


U.S. President-elect Donald Trump’s rhetoric calling into question the United States’ long-standing position that Taiwan is part of “one China” and broader questions about his protectionist agenda were seen by some analysts as dragging down shares in Hong Kong.

The benchmark Hang Seng index dropped 1.4 percent, to 22,433.02 points, while the Hong Kong China Enterprises Index lost 1.7 percent, to 9,699.31 points.

“You can sense the nervousness...the big caps got hit quite early today, and I think it’s related to Donald Trump,” said Alex Wong, Hong Kong-based director at Ample Finance Group. Wong added that there was concern about retaliatory action from China, a major holder of U.S. government debt.

The bourse’s large cap sub-index fell 1.5 percent on Monday, while the small cap and mid-cap sub-indexes both fell around 2 percent.

Others said the Trump factor was not large. Linus Yip, strategist at First Shanghai Securities Ltd, said Hong Kong stocks were pulled down by mainland markets.

“The market is awaiting new policies from Trump after he takes office, which makes investors more cautious. It’s not easy to measure the influence now. I think the main reason for today was the slump in mainland peers,” he said.

Nearly all sectors lost ground in both China and Hong Kong.

Zhang Qi, analyst at Haitong Securities in Shanghai, said year-end profit-taking was also a factor in the mainland markets.

Energy suffered the least in China and Hong Kong, thanks to an oil price surge in the morning after OPEC and other producers reached their first deal since 2001 over the weekend to jointly reduce output.

Reporting by Jackie Cai, Samuel Shen and John Ruwitch in SHANGHAI, and Jessica Macy Yu in HONG KONG; Editing by Jacqueline Wong

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