China Stocks Pull Back From Seven-year High

Hong Kong and Shanghai stocks retreated Tuesday morning after rallying the previous day to new seven-year highs. The Hang Seng Index fell 0.5%, with the mainland-China-tracking Hang Seng China Enterprises Index down 0.7%. On the mainland, the Shanghai Composite Index dropped 0.5%. Oil stocks fell sharply in Hong Kong, with PetroChina Co. and China Petroleum & Chemical Corp. (Sinopec) losing 4.7% and 3.8%, respectively, after PetroChina's much worse-than-expected earnings for the first quarter. The oil producer recorded a 82% slide year-on-year in its net profit due to plunging oil prices and also issued a profit warning for the first half if the oil prices remain at a low level. Sinopec also suffered a drag from news the president of its parent -- China National Petrolem Corporation -- is under investigation due to "severe violations of discipline and laws," according a statement Monday from the Communist Party's central disciplinary watchdog. A Caixin report linked Wang's case to that of indicted former security chief Zhou Yongkang. Shares of the two oil giants had surged Monday, triggered by a state-media report that the Chinese government may cut the number of central-government-owned big energy companies through a wave of large mergers, including a marriage of PetroChina and Sinopec. However, PetroChina and Sinopec each issued a statement Monday night saying that they hadn't received any such indication from the government so far. Meanwhile, China's State-owned Assets Supervision and Administration Commission, the nation's top regulator for state-owned firms, didn't directly deny the report but instead said the state media account hadn't checked the information with them. In Shanghai, shares of Sinopec and PetroChina advanced, however, rising 4.2% and 2.1%, repsectively. Likewise, Sinopec Shanghai Petrochemical Co. , a Shanghai-based subsidiary of Sinopec, was even suspended from trading after rising limit-up by 10%. Among other sectors, major Chinese banks mostly traded lower, with China Citic Bank Corp. leading losses with a 1.8% decline. Bank of Communications Co. lost 0.9%, and China Merchants Bank Co. fell 0.6%. Insurance firms also posted losses across the board, as China Pacific Insurance Group Co. gave up 3.2%, and PICC Property & Calsualty Co. moved down by 2.2%. However, shipping stocks extended gains following a previous rally triggered by the state-firm merger report. China Cosco Holdings Co. led the sector gains with a 3.4% jump in Hong Kong and a 10% surge in Shanghai, while China Shipping Container Lines Co. rose 2.7% on the back of strong earnings. Also receiving an earnings bump was auto maker BYD Co. , up 3.2% after its earnings soared by a factor of 10.