China stocks Get Down as Foreign Direct Investment Declines

As the trading volume on the benchmark index has plunged to the lowest level in 2012, the Chinese stocks were affected badly as well. These were down and foreign direct investment in this Asian powerhouse also dropped. The trading volume of China has also slumped to the lowest level since 12th December, 2011.

China Construction Bank Corp. share prices have got down by 1.2%. Ping An Insurance Group Co. had similar fate with its share prices going down by 3.2%. HSBC has decided to sell its part of shares on Ping An Insurance Group Co. and this may have resulted into negative sentiment on the company among investors. The withdrawal of HSBC is in all way a big blow to the company, as mentioned by the analyst of Bank of Communications, Li Wenbing. Certain part of these sold shares of HSBC probably will be held now by Charoen Pokphand Group. The company has announced to be ready to pay HK$60 for each of the Hong Kong shares of Ping An, that were previously owned by HSBC. Incidentally, Charoen Pokphand Group is owned by the billionaire Dhanin Chearavanont. The Hong Kong shares of Ping An also dropped by 1% and is at HK$57.85.

Anhui Water Resources Development Co., however had a bit of different fate as the same showed the biggest jump in the last 3 weeks (The surge was of 3.1%). The recent report from The China Securities Journal states that the Government’s investment in water conservation will increase in future and this definitely helped Anhui Water Resources Development Co. According to the report, the Government will increase the investments by 15% and it will be worth $54 billion this winter and next spring. The report cites Chen Lei, the Minister of Water Resources of China. Chongqing Three Gorges Water Conservancy & Electric Power also saw positive movements as its share prices increased by 0.9%.

According to Mao Sheng, an Analyst at Huaxi Securities Co., the economy of China is not doing well enough and the decline in foreign investment clearly proves that. He also commented that investors will take some time (At least another quarter) to see whether the Chinese economy has begun to recover and they are also waiting what kind of policy actions the new leadership of China takes. Incidentally, the foreign direct investment has declined 11 times in the last 12 months and is at $8.31 billion currently. These stats were released by the Ministry of Commerce.

The Shanghai Composite Index is currently down to 2008.92 which mark its lowest level since 26th September. The Hang Seng China Enterprises Index however retreated by 0.3%. CH55BN which measures the performance of the most traded US-listed Chinese companies, also surged by 2.2%.

The 2nd biggest lender of the country, China Construction Bank has seen a slump and is down at 4.16 Yuan currently. The largest lender of the country, Industrial & Commercial Bank of China also suffered a slid of 0.5% and is at 3.83 Yuan now.

According to a recently concluded survey, for the rest of the year, the Chinese Government may not cut the lender’s reserve requirements. For the large lenders, the reserve-requirement ratio will probably be kept at 20% by People’s Bank of China. The survey compares with the half and full point cut forecasted in October and September respectively.

The 30-day volatility for China was at 12.5, which is basically lower than the average for this year (Measured at 17.1). Today, the trading volumes on the Shanghai Index were down by 35% if compared to the 30-day average. Incidentally, last week, after the new leadership of China’s Communist Party was announced, the Shanghai Composite fell down by 2.6%.

According to the Chief Investment Officer of Solaris Group LLC, Timothy Ghriskey, the market is still uncertain about the possible direction that the new administration is going to take and this is pretty normal for any country which in near future will experience changes in the Government. Ghriskey added a few positive steps will definitely be enough to lure back investors as they are just holding back for the moment.