China Market falls as industrial profits shrink

The Mainland China equity market closed down on Wednesday, 27 November 2019, snapping two days of winning streak, after an official reports showed profits at China's industrial firms shrank at their fastest pace in eight months in October. At closing bell, the benchmark Shanghai Composite Index declined 0.13%, or 3.86 points, to 2,903.20. The Shenzhen Composite Index, which tracks stocks on China's second exchange, shed 0.23%, or 3.64 points, to 1,602. The blue-chip CSI300 index dropped 0.41%, or 16.03 points, to 3,875.62.

Sentiment soured after an official report by the government showed profits at China's industrial firms shrank at their fastest pace in eight months in October. China's industrial profits decreased 9.9% on a yearly basis in October, following a 5.3% decrease in September, largely due to falling producer prices and slowdown in production and sales growth, data from the National Bureau of Statistics showed Wednesday. This was the third consecutive decrease. During January to October, industrial profits logged an annual fall of 2.9%. Profits had decreased 2.1% in January to September period. The slowdown in the global economy and trade frictions is likely some of the main drivers behind the disappointing industrial profit figure.

During an Oval Office event Tuesday, U.S. President Donald Trump said that Washington was in the final throes in its efforts to reach a trade deal with China, but also underscored that Americans stand with pro-democracy protesters in Hong Kong. China said on Tuesday it had summoned the U.S. ambassador to protest the passage in the U.S. Congress of the Hong Kong Human Rights and Democracy Act.

MSCI has completed the final phase of the 20% inclusion of Chinese A-shares in MSCI indexes, the index publisher said on Tuesday. A-shares now weigh 4% in the benchmark MSCI Emerging Markets Indexes.

Shares of industrial companies odeclined, with Shanghai International Port Group down 2.6% to 5.59 yuan and Cosco Shipping Holdings down 2.3% to 4.71 yuan.

Agricultural stocks shot up after Beijing said it was committed to the basic policy of contracting lands to farmers in the long run. Xinjiang Talimu Agriculture Development surged by the 10% daily cap to 5.36 yuan and Jiangsu Provincial Agricultural Reclamation gained 5.8% to 6.94 yuan.

China Zheshang Bank retreated 4.6% to 4.74 yuan, breaching its initial public offering price of 4.94 yuan on the second day of trading. Its IPO shares were sold for 9.4 times earnings, compared with the industry average of the multiple of 6.9 times.

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