China stocks retreat as financial shares lead large caps lower

Bloomberg

China’s large-cap stocks fell for a second day as a technical indicator signaled recent gains were overdone. Insurance companies led the retreat.
The SSE 50 Index of some of China’s largest companies dropped 0.6 percent at the close. New China Life Insurance Co. slid the most in two weeks to lead insurers lower, while Kweichow Moutai Co. fell the most in nearly a month. The Hang Seng Index rose 0.1 percent as Geely Automobile Holdings Ltd. surged after preliminary data showed auto sales rose in June. Galaxy Entertainment Group Ltd. paced declines after Macau’s casino revenue growth missed estimates last month.
China’s large-cap companies have outperformed the broader market this year as a deleveraging campaign punished smaller firms with higher borrowing costs and state-backed funds were suspected of favoring stocks with heavy index weightings. The SSE 50’s 14-day relative-strength index last week climbed near the 70 level that signals to some traders an asset is overbought.
A gauge of Chinese manufacturing compiled by Caixin Media and Markit Economics unexpectedly rose to 50.4 in June, indicating expansion, after an official measure released last Friday beat all estimates.
New China Life Insurance dropped 2.2% in Shanghai, while China Pacific Insurance (Group) Co. and Ping An Insurance (Group) Co. slipped more than 1.3%. In Hong Kong, Galaxy Entertainment slid 2.2% for its biggest drop since May 17, while Sands China Ltd. fell 1.3%. President Xi Jinping’s trip to Hong Kong likely curtailed visits to Macau in the last week of the month, analysts said. Geely surged 4% to take its gains for the year to 136%.
China ZhengTong Auto Services Holdings Ltd. climbed 7.7%, and Great Wall Motor Co. added 2.4%. Preliminary data indicate China’s automobile sales rose 3% to 4% last month from a year ago, signaling better consumer sentiment than in the first five months of the year, Bocom International Holdings Co. analyst Angus Chan said. China’s bond-connect program with Hong Kong, which gives offshore investors another way to access the mainland’s debt market, started Monday. Officials from Hong Kong’s Securities & Futures Commission visited a number of brokerages after a rout in small-cap stocks last week, scrutinizing trading records and margin loans, Apple Daily reported, citing unidentified people.
Major Holdings Ltd., among the rout’s victims, plunged as much as 18% Monday before paring losses to 1.8%.