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Shanghai stocks retreat on soft services sector report, liquidity concerns

Shanghai stocks retreat on soft services sector report, liquidity concerns

SHANGHAI: China’s major stock indexes fell on Thursday, after a private survey showed the country’s services sector cooled in July and a net drain of funds by the central bank renewed concerns about liquidity conditions. The blue-chip CSI300 index fell 0.9 percent, to 3,727.83 points. The Shanghai Composite Index lost 0.4 percent to 3,272.93 points, further retreating from the previous session’s 19-month intraday high of 3,305.43.

China’s services sector expanded at a slightly slower pace in July as new business growth eased, a private business survey showed on Thursday. The findings were in line with an official gauge of the non-manufacturing sector published on Monday which also showed growth in services cooled, adding to views that China’s economy could slow slightly in coming months after a strong first half. The survey undermined market sentiment as the Shanghai Composite was approaching a key technical level, market participants said. “The SSEC is now trading near the 3,300-level, which is a key mark and could take much time to break through,” said Zhang Gang, analyst with China Central Securities. The SSEC last flirted with that level in December 2016 and April 2017, but failed to breach it and advance further. Wednesday’s break was not sustained, with the index ending down 0.2 percent for the day. Concerns about tighter liquidity also dampened activity.

China’s central bank on Thursday drained a net 20 billion yuan ($2.97 billion) via its open market operations, its first net drain since July 13. Liquidity had also been squeezed in June and July, pushing money market rates higher and prompting the central bank to inject funds into the system. But tightness early in a month is rare. “The net drain today does not signal a change in monetary policy, and the central bank will maintain frequent communication with the market to maintain steady expectations,” Industrial Securities noted in a report. With the exception of materials which continued to outperform and rose 1 percent, all other sectors fell across the board. Losses were led by banking and real estate stocks. Shares in listed units of Anbang, including developer Financial Street, dropped after the nation’s insurance regulator said it has no plans to ask the financial conglomerate to sell overseas assets.