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China, HK stocks fall on worries over policy tightening

03/07/2021 | 11:38pm EDT

* SSEC -1.0%, CSI300 -1.9%, HSI -1.3%

* HK->Shanghai Connect daily quota used -5.1%, Shanghai->HK daily quota used -1.3%

* FTSE China A50 -2.4%

SHANGHAI, March 8 (Reuters) - China and Hong Kong stocks reversed course to trade lower on Monday as a lower-than-expected 2021 economic growth target from Beijing sparked concerns that Chinese officials could tighten policy to rein in lofty valuations.

** The CSI300 index fell 1.9% to 5,162.22 points at the end of the morning session, while the Shanghai Composite Index lost 1.0% to 3,466.51 points.

** The Hang Seng index dropped 1.3% to 28,708.93 points, while the Hong Kong China Enterprises Index lost 1.2% to 11,154.90.

** Leading the declines, the CSI300 consumer staples index and the CSI300 healthcare index slumped 3.7% and 3.4%, respectively, while the Hang Seng tech index tumbled 4.8%.

** China on Friday set a modest annual economic growth target, at above 6%, which was significantly below the consensus of analysts, who expect growth could beat 8% this year.

** "China has become the most expensive market for non-financial equities among major markets globally. Meanwhile, the National People's Congress declared a very conservative growth target, creating room for policymakers to take action to contain risks of asset bubble in both equities and property," Citi Private Bank analysts, including Ken Peng, said in a note.

** Citi said that more restrained credit growth could lead to lower valuations in the coming months.

** The worry for investors is that liquidity is expected to tighten even as economic recovery at home and abroad fell short of expectations, said Yan Kaiwen, an analyst with China Fortune Securities.

** "The yuan's weakness would also dampen the appeal of Chinese equities to foreign investors," he added.

** China's onshore spot yuan weakened past 6.51 per dollar on Monday for first time since Jan. 4.

** On Monday, foreign investors sold a net 5.5 billion yuan ($844.88 million) worth of A-shares via the Stock Connect linking mainland and Hong Kong, according to Refinitiv data.

** There was a muted reaction to data showing that China's February exports grew at a record pace from a year earlier, while imports rose less sharply.

** Adding to the pressure were Sino-U.S. tensions.

** China urged the United States on Sunday to remove "unreasonable" curbs on cooperation as soon as possible and work together on issues like climate change, while accusing Washington of bringing chaos in the name of spreading democracy. ($1 = 6.5098 Chinese yuan renminbi) (Reporting by Luoyan Liu and Andrew Galbraith; Editing by Aditya Soni)

© Reuters 2021
Stocks mentioned in the article
ChangeLast1st jan.
CANADIAN DOLLAR / CHINESE YUAN RENMINBI (CAD/CNY) 0.00% 5.2297 Delayed Quote.1.69%
EURO / CHINESE YUAN RENMINBI (EUR/CNY) 0.03% 7.7952 Delayed Quote.-2.08%
HANG SENG -1.07% 28695.34 Real-time Quote.5.38%
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