Flash rally for China shares crashes; trading fluke blamed

By Clement Tan and Lu Jianxin

HONG KONG/SHANGHAI, Aug 16 (Reuters) – A mysterious surge in Chinese stock markets that lifted major indexes sharply early on Friday evaporated in the afternoon – and it appears likely the entire rally stemmed from a trading mistake.

The Shanghai Composite Index and the CSI300 Index started the day lower and then inexplicably began roaring up in the mid-morning, pulling Hong Kong shares up with them.

At the peak, the Shanghai benchmark was up 5.6 percent and the CSI300 was 4.4 percent ahead. But afternoon tumbles left them down 0.6 percent and 0.8 percent, respectively, for the day.

Continue reading “Flash rally for China shares crashes; trading fluke blamed”

Earnings disappointment may stall chase for outperforming China stocks

By Clement Tan

HONG KONG, Aug 7 (Reuters) – Chinese companies still able to report healthy profits could see their shares trim sharp gains if earnings disappoint, narrowing a yawning gap with firms struggling to cope with Beijing’s drive to consolidate industries plagued by overcapacity.

The signs are starker in onshore markets where sectors such as technology and pharmaceuticals, which are still generating healthy profits, have significantly outperformed the lumbering industrials and materials firms plagued by inefficiency.

Slowing growth in China is now a top concern for global investors, who have steadily cut exposure to emerging markets and braced for the risk of a possible hard landing in the world’s second-largest economy.

A sub-index of information technology components on the CSI300 index of the leading A-share listings has surged almost 40 percent on the year, while sub-indexes for energy and materials have each plunged nearly 30 percent.

The large divergence raises the risk that investors are paying too high a premium in chasing earnings growth.

Continue reading “Earnings disappointment may stall chase for outperforming China stocks”