November 5, 2018 / 5:01 AM / 14 days ago

China, HK stocks pressured ahead of U.S. mid-terms

* SSEC falls 1 pct, CSI300 down 1.41 pct

* HSI down 2.7 pct, HSCE slip 2.19 pct

* Investors await U.S. mid-terms election result

By Noah Sin

HONG KONG, Nov 5 (Reuters) - Stocks in China and Hong Kong retreated on Monday as investors stayed on the sidelines ahead of the result of the U.S. mid-term elections, which could alter Washington’s policy on the trade front. ** The Shanghai Composite index was down 1 percent at 2,649.84, while the blue-chip CSI300 index lost 1.41 percent. ** CSI’s financial sector sub-index was lower by 1.69 percent, the consumer staples sector down 3.19 percent, the real estate index down 2.49 percent and the healthcare sub-index down 1.81 percent. ** Optimism from the talk of a U.S.-China trade deal, which sent Chinese and Hong Kong stocks higher on Friday, vanished on Monday morning after Larry Kudlow, a White House economic adviser, denied that U.S. officials have drawn up a proposed trade plan with China. ** Investors are hesitant to increase their exposure ahead of the U.S. mid-term election, which could alter the trade policy of the U.S., said Steven Leung, director of sales at UOB Hay Hian, who is based in Hong Kong. ** Stocks in Hong Kong fell faster than those on the mainland. The Hang Seng Index was down 2.65 percent at 25,785.20, while the index for Chinese H-shares listed in Hong Kong fell 2.19 percent to 10,453.94. ** “Last week, there were a lot of short-cover positions as the market turned around after the positive news on trade war,” said Leung. “We may see more short positions (on Hong Kong stocks) this week, if we don’t have more good news on trade.” ** Economic worries added to the mix of pressure points. The Caixin October services PMI came on Monday at its lowest point since September 2017, while the business index hit its lowest point in a decade.. ** Meanwhile, President Xi said in a keynote speech that China will establish a new science and innovation board on the Shanghai Stock Exchange. While foreign investors may welcome a new way to gain exposure to Chinese equities, the board could also drive attention and capital away from the faltering A-share market. ** “It’s fine if you talk about something like this in a bull market,” said an analyst at a local brokerage, who did not want to be named due to the political sensitivity of the matter. “But why announce this now?” ** But Leung said authorities, aware of the implications of a launch in a bear market, will time the new board’s arrival carefully. ** “That will depend on when they push it through. We don’t have a time-table at the moment. I think they will probably wait until A-shares are doing better until they launch this.” ** The smaller Shenzhen index was down 0.67 percent and the start-up board ChiNext Composite index was weaker by 0.69 percent. ** Around the region, MSCI’s Asia ex-Japan stock index was weaker by 1.47 percent while Japan’s Nikkei index was down 1.31 percent. ** The yuan was quoted at 6.9134 per U.S. dollar, 0.38 percent weaker than the previous close of 6.887. ** The largest percentage losses in the Shanghai index were Jiangsu Hongtu High Technology Co Ltd, down 10.06 percent, followed by Eastern Gold Jade Co Ltd, losing 9.96 percent and Zhejiang Hugeleaf Co Ltd, down by 6.63 percent. ** The three biggest H-shares percentage decliners were Guangzhou Automobile Group Co Ltd, which has fallen 4.96 percent, Tencent Holdings Ltd, which has lost 4.74 percent and Air China Ltd, down by 4.1 percent.

Reporting by Noah Sin; Editing by Sunil Nair

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