SHANGHAI: China and Hong Kong shares fell on Monday morning, led by property stocks after some cities imposed new housing controls to hose down an overheated market. Investor sentiment was also undermined by simmering concerns that China’s beefed-up environmental protection could reduce demand, and consequently economic growth. Monday’s weak performance followed a hawkish Federal Reserve policy statement last week and Standard &Poor’s downgrade of China’s sovereign credit rating. In China, both the blue-chip CSI300 index and the Shanghai Composite Index lost 0.4 percent, to 3,822.03 points, and 3,340.67 points, respectively. In Hong Kong, the benchmark Hang Seng index dropped 1.0 percent, to 27,590.07 points, while the Hong Kong China Enterprises Index lost 1.3 percent, to 10,959.82. UBS strategist Gao Ting said that some top-down investors now anticipate a slowdown in China’s GDP growth, and worry about the sustainability of the global economic recovery.
Although China’s supply-side reform and tighter environmental protection measures have so far been well received by the market, “some investors now worry that these measures have started hurting demand,” Gao wrote in his latest strategy report. He said stronger environmental protections could force many smaller resources firms to halt production, affecting investment, while surging upstream costs may finally pass through to consumer goods and services, undermining demand. “If demand is softer than expected in the upcoming peak season, both commodity prices and related stock prices may fall in response.” Indeed, both China stocks and Shanghai commodity futures have shown signs of fatigue recently, after strong gains earlier this year. An index tracking resources shares in China fell 0.8 percent, while the raw materials sector slumped nearly 2 percent in Hong Kong. Property shares in both China and Hong Kong tumbled fell more than 4 percent on Monday morning, after a number of Chinese cities imposed new property control measures at the weekend in a concerted effort to cool down the overheated housing market. But the consumer sector in China was firm, led by food & beverage producers, as investors bet they will benefit from the upcoming week-long National Day holiday that starts Oct. 1.
