By Tanner Brown
Mainland Chinese markets fell sharply — as expected — on Monday, after a trading break since Jan. 23 and the rapid emergence of the coronavirus outbreak.
The CSI 300 /zigman2/quotes/210598128/delayed XX:000300 +0.30% , which gives a snapshot of the top 300 stocks on the Shanghai and Shenzhen exchanges, fell 7.8%. The benchmark Shanghai Composite Index /zigman2/quotes/210598127/delayed CN:SHCOMP -0.0004% fared nearly identically, with a 7.7% daily decline. That was its worst single-day tumble in nearly five years. The smaller Shenzhen Composite Index /zigman2/quotes/210598015/delayed CN:399106 +0.20% fell 8.4%.
Beijing’s announcement of several measures to support the anticipated stock-market bloodbath did little to help most sectors.
Nearly all of mainland China’s biggest market-capitalization stocks fell Monday — in fact, more than 80% of listed companies fell past the 10% trading limit that the two mainland bourses impose. But some fared worse than others. Here’s a brief look at a few leading sectors, and which had the nastiest case of the Mondays and which emerged relatively unscathed.
Banking: China’s big four banks were relative bright spots of the day, even though all fell several percent. The world’s largest company by assets, the Industrial and Commercial Bank of China Ltd. /zigman2/quotes/202525815/delayed CN:601398 -0.37% , outperformed the bourse with its 5.24% fall — which on almost any other day would be a disastrous nose dive. The Agricultural Bank of China Limited /zigman2/quotes/204629388/delayed CN:601288 0.00% slipped the least, ending lower by 4.26%, with China Construction Bank Corp. /zigman2/quotes/208058581/delayed CN:601939 -0.28% tracking the market decline with a 7.6% loss.
The big banks weren’t expected to have it as rough. Though smaller lenders in China have been experiencing severe and mounting debt problems, larger institutions have maintained reasonable stress-test results and have gotten some relief from Beijing’s recent decision to increase reserve ratio requirements.
Investors may have also seen the central bank’s announcement of supportive measures over the weekend as good news for commercial lenders.
Automobiles: Electric-car maker BYD Co. Ltd. /zigman2/quotes/207153762/delayed CN:002594 -1.55% , a leading contender to fight off Tesla’s aggressive move into China, fell the 10% limit on Monday after a strong January, impressing investors with its profitability and number of units sold, especially amid arguably the worst time in China’s automobile industry in decades. The electric-vehicle subsector has been hit particularly hard, as Beijing has withdrawn generous subsidies that helped its numerous EV companies explode over the last several years.
Shares of SAIC Motor /zigman2/quotes/201442870/delayed CN:600104 -2.33% and Chongqing Changan Automobile Co. Ltd. /zigman2/quotes/208414644/delayed CN:000625 -6.83% — both state-owned companies — fell 9.3% and the 10% limit, respectively.
Insurance: Ping An Insurance (Group) Co. of China Ltd. /zigman2/quotes/202773380/delayed CN:601318 -0.50% — the country’s biggest insurer and the heaviest-weighted stock on the CSI 300 — fell 6.92%. The company’s exposure is broad, with major investments in financial services and banking in addition to insurance. Its shares are also traded in Hong Kong /zigman2/quotes/210315058/delayed HK:2318 -1.88% , where it had had a bullish December and January until the coronavirus epidemic began to affect offshore stocks, as the city did not have an extended holiday trading break as the mainland did.
Energy: One of the best performers among China blue chips was China Yangtze Power Co. Ltd /zigman2/quotes/207380376/delayed CN:600900 -0.05% , which fell by a mere 0.12% — which far outperformed the CSI 300 and CSI 100. Yangtze Power is owned by a unit of China’s powerful state-owned Assets Supervision and Administration Commission of the State Council.
While energy commodities tumbled on Monday, electricity grid and provider companies fared better, as China’s public indoor heating and private home heating are relatively inelastic in the short term, with customers willing to pay to stay warm in the winter. It may not have hurt that residents have been confined to their homes during the coronavirus outbreak.
Manufacturing: Manufacturing had a triple whammy to deal with Monday morning. On top of the extended trading break and the coronavirus drag-down, weak manufacturing data were released just as markets reopened, revealing the slowest expansion in the sector in five months.
The Caixin China General Manufacturing Purchasing Managers’ Index, an independent survey of China’s manufacturing industry, attributed the dour numbers to soft output, new orders and employment, all partial remnants of the trade war. Even as companies in the sector have begun to pick back up, “some manufacturers did not replenish stocks despite the pickup in production, due to limited improvement in domestic and foreign demand,” said Zhong Zhengsheng, an analyst with Caixin Insight Group.
Tanner Brown is a contributor to MarketWatch and Barron’s and producer of the Caixin-Sinica Business Brief podcast.