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China stocks slip but set to end the week higher; Hong Kong down
July 21, 2017 / 4:34 AM / 5 months ago

China stocks slip but set to end the week higher; Hong Kong down

* SSEC -0.2 pct, CSI300 -0.3 pct, HSI -0.1 pct

* Opening of China’s markets helps rotation into blue chips

* Materials stocks supported by GDP data

SHANGHAI, July 21 (Reuters) - China’s stocks slipped on Friday morning, but were set to end the week higher, led by strong gains in blue chips, as investors sought firms with solid growth prospects and lower valuations amid tighter financial regulations and liquidity conditions.

The CSI300 index fell 0.3 percent, to 3,736.13 points at the end of the morning session, retreating from an 18-month high, while the Shanghai Composite Index lost 0.2 percent, to 3,238.15 points.

Both indexes were set to end the week higher, erasing losses earlier this week when investors dumped start-ups stocks.

“Blue chips found favour with investors as they attach great importance to performances and valuations at listed firms due to curbed risk appetite amid tighter financial regulations and liquidity conditions,” said Xu Wei, analyst with Hongxin Securities.

Xu expected the tighter financial regulations to continue as a largely stable economy allow Beijing more leeway to tackle bubbles.

Among blue chips, Shanghai-listed China Molybdenum Co Ltd , a major non-ferrous metals producer in China, has gained 14.8 percent this week. The stock is up more than 40 percent in July.

China’s economy expanded 6.9 percent in the second quarter, defying expectations for a slight loss of momentum in growth.

Fitch Ratings said on Thursday China’s renewed commitment to contain financial risks signals a possible shift away from high economic growth targets, though policymakers are likely to remain cautious about tightening too aggressively.

China’s opening up its stock market to foreign investors by the Shanghai, Shenzhen and Hong Kong connect programmes, as well as by the MSCI’s decision to include China stocks, also helped prompt a rotation into blue chips, Xu added.

U.S. index provider MSCI’s has agreed to add 222 China-listed large-cap stocks to its Emerging Markets Index (EMI), tracked by around $1.6 trillion. China Molybdenum is among them.

In sharp contrast with strong gains in blue chips, the tech-heavy start-up board ChiNext still hovered around 30-month lows after slumping 5.1 percent on Monday, as market participants shunned firms that feature dim performance and higher valuations.

The index is almost 60 percent below a record high hit in June 2015.

For the week, materials shares are set to be the best performers, helped by expectations China would continue to push supply-side reforms and keep its economy largely stable.

An index tracking major raw material firms has leapt nearly 5 percent this week, far outperforming the broader market, after they forecast surges for mid-year earnings growth.

Hong Kong stocks edged lower, as investors paused for a breath after the benchmark index hit a fresh two-year high on Thursday.

The Hang Seng index dropped 0.1 percent, to 26,706.31 points.

The Hong Kong China Enterprises Index lost 0.6 percent, to 10,777.54 points.

Most sectors lost ground, while utilities sector gained 1.8 percent, aided by a strong rally in Power Assets Holdings after the company declared a dividend of HK$8.27 per share.

Reporting by Luoyan Liu and Andrew Galbraith; Editing by Sam Holmes

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