China stocks down, solid profit data offset by cautious mood; HK flat

* SSEC -0.1 pct, CSI300 -0.2 pct, HSI +0.1 pct

* China industrial profit growth accelerated to 16.7 pct in
May

* China mid-year earnings season starts next week

SHANGHAI, June 27 (Reuters) – China stocks eased slightly on
Tuesday despite solid industrial profit data, as investors were
cautious ahead of the mid-year earnings season and after the
blue-chip index rose to 1-1/2-year highs.

The blue-chip CSI300 index fell 0.2 percent, to
3,659.35 points by the lunch break, while the Shanghai Composite
Index lost 0.1 percent, to 3,182.66 points.

Investors largely looked past news that profits at China’s
industrial companies surged 16.7 percent in May from a year
earlier, accelerating from April and defying expectations of a
slowdown.

With the CSI300 trading near the highest level since early
2016, some investors aren’t sure if the index could run up much
further amid signs Beijing will continue to keep liquidity
conditions relatively tight.

Citing “relatively high” liquidity levels in the banking
stem, China’s central bank on Tuesday skipped open market
operations for the third consecutive day, as short-term
borrowing rates eased recently.

“The central bank doesn’t want the market to form
expectations of loose liquidity,” Wang Gang, strategist at
Huajin Securities, wrote.

“In the future, liquidly will remain relatively tight. Under
such a backdrop … there’s limited room for blue-chips to rise
further.”

Wang said investors were also bracing for the mid-year
earning season, which starts next week, to reassess their
portfolios.

Most sectors fell, led by real estate stocks,
which took a breather and dropped 1.4 percent after jumping
nearly 9 percent during the previous two sessions.

HONG KONG

Hong Kong’s benchmark indexes were little changed.

The Hang Seng index added 0.1 percent, to 25,894.55
points, while the Hong Kong China Enterprises Index lost
0.2 percent, to 10,508.37.

The upward momentum in Hang Seng appears to be losing steam,
as the recent sharp rise in China blue-chips have boosted the
premium mainland “A shares” command over Hong Kong “H
shares” to roughly 25 percent, from a low of 13 percent three
months ago.

Investors are looking for new catalyst as Chinese President
Xi Jinping will visit Hong Kong from June 29 to July 1 to mark
the 20th anniversary of the handover of the city from British
colonial rule to the mainland.

(Reporting by Samuel Shen and David Stanway; Editing by Shri
Navaratnam)


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