China stocks end at 4-year low after state oil pair stood aside

Source: Xinhua | 2018-12-28

Chinese shares marked their lowest close in four years yesterday, dragged down by Sinopec — which fell after Reuters reported that the state-owned oil giant had suspended two top executives at its trading arm.

The Shanghai Composite index fell 0.6 percent to 2,483.09 points, while the blue-chip CSI 300 index was down 0.4 percent.

The Shanghai stock index marked its lowest close since November 2014. The index now sits below both its 50-day moving average and its 100-day moving average.

The CSI 300’s financial sector sub-index slid 0.1 percent, the health care sub-index was down 0.9 percent, while the smaller Shenzhen index ended down 1.2 percent, and the startup board ChiNext Composite index gave up 1.3 percent.

Sinopec suspended two top officials for inflicting severe losses in trading, Reuters reported yesterday.

Shares of the company, which is Asia’s largest refiner, dropped after the news broke and closed down 6.8 percent in Shanghai and 4 percent lower in Hong Kong.

“This came as a bit of a shock to the market,” said Zhang Gang, a Shanghai-based analyst at Central Securities. “It is still very unclear what might happen next at the company.”

The sudden suspensions erased the optimism in the morning session, when expectations of policy support and buoyant global stock markets led local stocks higher. Instead, investors took stock of fresh data reporting China’s first fall in industrial profits in three years.

Oil prices, which rallied and supported global shares previously, did a U-turn yesterday amid worries over a glut in crude supply and concerns over a faltering global economy.

Sentiment in the Chinese market remains fickle and confidence is lacking, Zhao Wei, an analyst at Founder Securities, wrote yesterday. But the risk of pledged shares, which prompted authorities to intervene in October, will give the market some support at key levels.

Zhang also sees the Shanghai index finding some support around 2,500 points before the New Year, but “it is hard to see if that will remain the case after that, especially if there are more black swan events” like the Sinopec suspensions.

The largest percentage losses in the Shanghai index were Suzhou Keda Technology Co Ltd and Jiangsu Holly Corp, both down the daily limit of 10 percent, and Nanjing Textiles Import & Export Corp Ltd, which lost 9.2 percent.

So far this year, the Shanghai stock index is down 24.9 percent and the CSI 300 has fallen 25.8 percent.