China stocks fell on Thursday morning after a sudden drop in the commodities futures prompted skittish investors to take money off the table ahead of a slew of economic data to be released in the next few days.
Chinese commodities futures slid sharply in a widespread selloff that several market participants said was linked to an investigation into the rubber market.
The Shanghai Composite Index was down 1% at 2,667.6 by midday Thursday, after trading narrowly for most of the session below the 2,700 mark, a level the index has failed to breach multiple times in the past month.
"Futures prices suddenly weakened, which sent A shares lower," said Chen Shaodan, analyst at China Development Bank Securities in Beijing.
Metals were broadly lower with Zinc Oxide manufacturer Sichuan Hongda Co Ltd down 3.9% and Jianxi Copper Co Ltd off 3.5%.
Financials weighed after Bank of China Ltd received approval for a $8.8 bln share sale. Analysts said concern ahead of a flurry of economic data soon to be released gave investors an excuse to sell large caps.
Bank of China eased 0.9%, Shanghai Pudong Development Bank Co Ltd dropped 2.5%, while China Minsheng Banking Corp Ltd fell 1.5%.
There was some interest in mid-sized blue-chip companies, such as drugmakers, with Shandong Lukang Pharmaceutical Co Ltd jumping by its 10% daily limit to become the top gainer.
"If the broader market is not strong, gains in mid-sized companies have no way to help the index break through the pressure point of 2,700," said Wen Lijun, analyst at Nanjing Securities in Shanghai.
Investors await a flood of monthly data from China in coming days expected show continued moderation in economic growth in August, another bumper trade surplus and an increase in inflationary pressures as bad weather across much of the country pushed up food prices.
PROPERTY, AIRLINES BOOST HONG KONG
Hong Kong recovered slightly from Wednesday's retreat, with local property plays and airlines finding favour.
The benchmark Hang Seng Index was up 0.55% by the midday break, bouncing off a support at the 23.6% retracement of its upmove from the May low to the August peak.
Cathay Pacific Airways Ltd continued their 2010 rally, up 3.7% to the highest level in about 22 months on heavy institutional buying.
Cathay shares are up more than 45% this year, easily the best performers on the Hang Seng Index, and ahead of BOC Hong Kong (Holdings), which is up 30% this year as the biggest beneficiary of Beijing's yuan liberalisation policies.
"There's a been a sharp revival in Chinese airlines and funds are increasingly building positions in the company," said Alfred Chan, chief dealer at Cheer Pearl Investments, one of the brokers trading the stock on Thursday.
"Cathay holds stakes in other airlines such as Air China and that's helping too," said Chan.
Local property shares received a boost from news that Wharf (Holdings), up 1.8%, won a bid to buy land in Shanghai for 4.8 bln yuan ($706 mln).
Hong Kong developers including Wharf and Henderson Land Development Co have been buying up land in China, confident about the market's outlook despite a series of tightening measures announced by Beijing to cool property prices.
