Cyclical shares lead first-day losses

China's A-share markets down despite the strong performance of 5G-related companies following the news of licenses for commercial use. 

China’s A-share markets posted losses on the first trading day of June, led by cyclical shares, despite strong rallies of 5G-related companies in afternoon trading.

The benchmark Shanghai Composite Index edged down by 0.3 percent, or 8.62 points, to finish at 2,890.08.

The smaller Shenzhen Component Index fell by 0.74 percent to end at 8,856.99 points, while the ChiNext Index slumped by 0.99 percent to finish at 1,468.98 points.

The combined turnover of the two bourses came to 479.1 billion yuan (US$69.3 billion), expanding from the 437.4 billion yuan during the previous trading day.

Losses were seen across the board, with electrical equipment makers, mining and chemical companies among the biggest losers. Shares of Zhongshan Broad-Ocean Motor Co Ltd, a Guangdong-based supplier of small and specialized electric machines, declined by 6.79 percent to stand at 4.12 yuan a share.

Boosted by the news from the Ministry of Industry and Information Technology that China will soon grant 5G licenses for commercial use, relevant stocks posted strong gains in the afternoon trading session, with Hangzhou Freely Communication Co Ltd, Wutong Holding Group Co Ltd and Nanjing Huamai Technology Co Ltd all recording the daily maximum rise of 10 percent.

Data from a private survey on Monday showed that Chinese manufacturing activity was better than expected in May.

The Caixin/Markit factory Purchasing Managers’ Index for the past month came in at 50.2, the same as in April and higher than the official number of 49.4 released last week. A reading above 50 indicates expansion.

Despite some divergence in the two indexes, both Caixin and the National Bureau of Statistics manufacturing PMI readings in May suggest that slowing global demand and recent escalations in trade tensions pose significant downward pressures on manufacturing, HSBC’s research team said.

Over the weekend, Beijing published a white paper denouncing US unilateral and protectionist measures and outlining requirements that need to be met before trade negotiations can resume.

ANZ’s research team predicts that June will likely be “an eventful month,” given uncertainties from trade tensions.


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