July 23, 2020 / 4:41 AM / 14 days ago

China stocks fall as consulate closure sets stage for profit taking

* SSEC -1.2%, CSI300 -1.1%, HSI +0.4%, HSCE +0.3%

* U.S. closes Chinese consulate, Beijing vows retaliation

* Tensions create room for ‘normal profit taking’ - analyst

HONG KONG, July 23 (Reuters) - China shares fell on Thursday after Washington’s abrupt order for closure of the Chinese consulate in Houston escalated tensions between the two countries, offering exits for investors who profited from the market’s recent rally. ** By midday break, the Shanghai Composite Index fell 1.2% to 3293.54 and the blue-chip CSI300 index was down 1.1%. Both benchmarks flitted in and out of negative territory and dipped at most 2% during morning trade.

** The smaller Shenzhen index lost 1.4% while the start-up Chinext board edged down 0.4%.

** The United States gave China 72 hours to close its consulate in Houston amid accusations of spying. China strongly condemned the move, calling it “unprecedented escalation”. A source said Beijing was considering shutting the U.S. consulate in Wuhan. ** Hong Kong’s Hang Seng Index, which fell on the Houston headline in late trading on Wednesday, recovered to gain 0.4% on Thursday morning. H-shares added 0.3%.

** “Tension between the U.S. and China is not something that’s coming as a surprise. This is normal profit taking in my opinion,” said Frank Benzimra, head of Asia equity strategy at Societe Generale in Hong Kong. ** The SSEC science and technology innovation board 50 index , which was published for the first time on Thursday and tracks the 50 most representative stocks on the Nasdaq-style STAR board, fell 1.2%.

** A-shares worth 711 billion yuan ($101.52 billion) are due to be freed from IPO lockup over the next one month, including 324 billion yuan from STAR, China Renaissance said in a report, which projected “pockets of pressure points” but limited impact on A-shares on the whole.

** Shares of Chinese property developers fell as more cities tightened home purchase curbs. The CSI300 real estate index was down 2.8% at midday. ($1 = 7.0035 Chinese yuan renminbi) (Reporting by Noah Sin; Editing by Krishna Chandra Eluri)

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