July 19, 2018 / 4:29 AM / 10 months ago

China stocks fall despite lending support as yuan weakens

* SSEC -0.5 pct, CSI300 -0.1 pct, HSI +0.1 pct

* Airline shares slump as yuan continues to weaken

* China’s A-shares are at a 17.81 percent premium over H-shares.

SHANGHAI, July 19 (Reuters) - China stocks dropped on Thursday, despite moves by the central bank to encourage more bank lending, as persistent yuan weakness hit airline stocks. Hong Kong equities were roughly flat.

** The CSI300 index fell 0.1 percent to 3,427.47 points at the end of the morning session, while the Shanghai Composite Index lost 0.5 percent to 2,772.14 points. ** The Hang Seng index climbed 0.1 percent to 28,132.71 points, while the Hong Kong China Enterprises Index gained 0.2 percent to 10,602.64.

** China’s central bank plans to introduce incentives that will boost the liquidity of commercial banks, helping them expand lending and increase investment in bonds issued by cooperates and other entities, a source with direct knowledge of the matter said on Wednesday. ** However, optimism of any benefit to the economy was offset by a weakening yuan. The Chinese currency fell to the lowest against the U.S dollar in almost a year. ** The CSI300 financial sector sub-index was higher by 0.34 percent, the consumer staples sector lost 0.48 percent, the real estate index climbed 0.27 percent and healthcare sub-index slipped 2.1 percent. ** The smaller Shenzhen index dipped 0.9 percent and the start-up board ChiNext Composite index slid 1.3 percent. ** Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.16 percent, while Japan’s Nikkei index closed down 0.11 percent. ** At 0411 GMT, the yuan was quoted at 6.7388 per U.S. dollar, 0.27 percent weaker than previous close of 6.7205. ** The largest percentage gainers in the main Shanghai Composite index were Jiangsu Yulong Steel Pipe Co Ltd, which climbed 10.03 percent, followed by Zoy Home Furnishing Co Ltd , which gained 10.01 percent and Zhejiang Dingli Machinery Co Ltd, which rose 10 percent. ** The largest percentage losses in the Shanghai index were Henan Oriental Silver Star Investment Co Ltd, which lost 10.01 percent, followed by Ningxia Xinri Hengli Steel Wire Rope Co Ltd, which fell 9.94 percent and Jiangsu New Energy Development Co Ltd, which slipped 9.53 percent. ** As of 0412 GMT, China’s A-shares were trading at a premium of 17.81 percent over the Hong Kong-listed H-shares. ** The Shanghai stock index is below its 50-day moving average and below its 200-day moving average. ** The price-to-earnings ratio of the Shanghai index was 12.05 as of the last full trading day, while the dividend yield was 2.7 percent.

Reporting by Samuel Shen and John Ruwitch, Editing by Sherry Jacob-Phillips

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