Shanghai stocks retreat on weak drug and consumer sectors

Shanghai stocks retreated on the first day of the inclusion of A-shares into the MSCI indexes.

Shanghai stocks retreated on the first day of the inclusion of A-shares into the MSCI indexes, led by falls in pharmaceutical shares and consumer sectors.

The Shanghai Composite Index shed 0.66 percent to close at 3,075.14 points on Friday.

A total of 226 companies listed on the A-share markets were officially added into the indexes published by global index compiler MSCI, including the MSCI Emerging Markets Index today as the first batch.

The partial inclusion of 2.5 percent this time would give the selected stocks an aggregate weight of 0.39 percent in the MSCI Emerging Markets Index.

The further inclusion of another 2.5 percent will take place on September 3, lifting the aggregate weight to 0.78 percent in the EM Index.

The inclusion "provides a much broader range of selection for global investors when they try to access the China market" and is "a very important step in China’s capital account opening-up process and a symbolic event of capital market connectivity between China and the world," according to JP Morgan.

However, "the impact of the MSCI’s inclusion of A-share on the A-share market will be very limited," said Zhu Haibin, chief China economist and head of China equity strategy at JPMorgan.

Stocks of medical companies led the losses. Guangzhou Baiyunshan Pharmaceutical Holdings Co retreated by 8.1 percent, and Zhende Medical Co and Topchoice Medical Investment Co both fell over 7 percent.

The consumer sector tumbled, reversing Thursday's sharp rise.

Food and beverage shares such as Fujian Anjoy Foods Co shed 7.66 percent, while Jiangsu Hengshun Vinegar Co lost 5.53 percent.

Retailers are also among the biggest decliners, with Anhui Andeli Department Store Co falling sharply by 9.93 percent and Red Star Macalline Group Corporation down 5.02 percent.

For the week, the Shanghai Composite Index extended falls to drop 2.11 percent, with turnover shrinking from 914.9 billion yuan (US$142.6 billion) to 889.7 billion yuan.

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