Asia: Falling Chinese stocks curb biggest monthly advance since 2007

China’s stocks fell on Tuesday as technology shares slumped and a gauge of utilities dropped after surging to five-year highs.

The Shanghai Composite Index fell from a five-year high, losing 0.1% to 3,165.81 at the close. The index has rallied 18% in December, the highest among major global benchmark gauges.

“Aside from corrections every now and then, the uptrend will continue,” said Mao Sheng, an analyst at Huaxi Securities in Chengdu. “The economy is set to recover gradually and there’s no change in the direction of government policies.”

The Shanghai Composite has rallied 50% this year, compared with a gain of only 9.6% from its Hong Kong counterpart, and is on track for its biggest yearly gain since 2009. The index was bolstered by a trading link with Hong Kong, as well as expectations that the government will further ease monetary policy after unexpectedly cutting interest rates last month.

Official manufacturing data for China for December will be released on 1 January. Economists forecast a reading of 50 for the purchasing managers' index, compared with November’s 50.3.

China requires more easing policies to ensure 2015’s economic stability, with more infrastructure investment and lower financing costs, the China Securities Journal said in a commentary today.

The Hang Seng China Enterprises Index slid 1.5%, after surging 4% yesterday for the biggest gain in a year, dragged down primarily by oil producers.

The Hang Seng Index lost 1.1%, while The CSI 300 Index advanced 0.1%, extending 2014’s annual gain to 48%.

Energy shares led declines in Hong Kong, with China Oilfield Services sliding 4.4%. Oil traded close to the lowest price in over five years, amid speculation that US crude inventories will remain at their highest since June.

Anhui Conch rallied to a three-year high in Shanghai and gained 6% in Hong Kong amid optimism for the reform of state-owned enterprises. Anhui Investment plans to convert a 51% stake in parent Conch Holdings into a direct holding of the company.

A gauge of financial shares in the CSI 300 jumped 2.5%, extending this month's gains to 38%, the best performer among the industry groups. Guoyuan Securities led a rally for brokerages, adding 4.3% after announcing yesterday it will further expand its margin trading and short selling businesses.

Huadian Power International plunged 6.6% in Shanghai and PetroChina dropped 2.9% percent in Hong Kong.

Citic Securities and Haitong Securities gained at least 4% in Shanghai, extending a rally in December to more than 65%.