STOCK MARKET

Hong Kong stocks close lower amid US policy uncertainty

Property developers lead losses as the Hang Seng Index finishes Thursday 0.57 per cent lower at 23,184.52

PUBLISHED : Thursday, 02 February, 2017, 9:18am
UPDATED : Thursday, 02 February, 2017, 10:20pm

Hong Kong stocks declined for a second day on Thursday after the US Federal Reserve decided to keep the interest rate unchanged in its first meeting after Donald Trump took office.

The Hong Kong market is suffering from renewed concerns over Trump’s economic policies, analysts said.

The benchmark Hang Seng Index closed down 0.57 per cent or 133.87 points to 23,184.52 while the Hang Seng China Enterprises index lost 0.62 per cent or 60.29 points to 9,696.32 on Thursday.

In the past, the market focused only on Trump’s pro-business policies. We haven’t seen any positive policies, but the negative ones are coming out
Hannah Li, analyst, UOB Kay Hian

Hannah Li, an analyst for UOB Kay Hian, said political risks brought by Trump’s presidency had been weighing on the Hong Kong market as it retreated from a “festival boom”. The Hang Seng Index hit a three-month high before the Lunar New Year holiday.

“The drop has yet to finish,” Li said. “In the past, the market focused only on Trump’s pro-business policies. We haven’t seen any positive policies, but the negative ones are coming out.”

Trump’s controversial immigration curbs caused global markets to plunge on Monday. And on Tuesday he criticised China and Japan for devaluing their currencies, triggering fresh protectionism concerns.

Chinese mainland markets will kick off their first trading session in the Year of Rooster on Friday.

Li said while anticipating a New Year rise in mainland stocks, investors would be watching out for any official response to Trump’s currency comments, which could sway market sentiment.

Property stocks were among the biggest losers on the Hong Kong bourse on Thursday. Mainland developer China Resources Land dropped 1.53 per cent to HK$19.30, while Sino Land fell 1.38 per cent to HK$12.86.

Castor Pang Wai-sen, head of research at Core Pacific Yamaichi, said the city’s property sector was hurt by fears over a possible rate increase in March, although the Fed gave no hint as to the timing of its next rise.

“With Trump promising more funding into infrastructures, the risk of higher inflation will loom,” he said. “And the Fed policymakers would take that into consideration when thinking of their next move.”

With Trump promising more funding into infrastructures, the risk of higher inflation will loom, and the Fed policymakers would take that into consideration when thinking of their next move
Castor Pang Wai-sen, head of research at Core Pacific Yamaichi

Shares in Shougang Resources closed 0.66 per cent down at HK$1.50 following reports the company was linked to missing mainland Chinese tycoon Xiao Jianhua, who was reportedly taken by mainland police to assist with anti-graft probes.

China Strategic Holdings, another company reported to have been linked with Xiao, dropped 3.77 per cent to HK$0.15 on Thursday.

Xiao doesn’t own any shares in Strategic Holdings “at the moment,” the company’s executive director Chow Kam-wah said by telephone.

Chinese dairy company Mengniu Dairy led the gains with a 2.65 per cent rise to HK$14.70, and Cheung Kong Infrastructure climbed 1.53 per cent to HK$63.25.

Nine Dragons Paper continued its rally, surging 2.51 per cent to HK$9.38 on Thursday. Its shares have advanced more than 18 per cent since it issued a positive profit warning on January 23, forecasting interim profit to grow by over 45 per cent.

Elsewhere in Asia, Japan’s Nikkei 225 lost 1.22 per cent to 18,914.58 on a stronger yen. The yen had strengthened 0.66 per cent from the previous close to 112.50 per US dollar by late Thursday afternoon. The Kospi in South Korea was down 0.46 per cent to 2,071.01.

On Wednesday, all three major US stock indices closed higher as interest rates remained unchanged and Apple shares rallied a day after the company announced strong earnings and iPhone sales. The Dow Jones Industrial Average finished 0.14 per cent higher at 19,890.94 points and the S&P 500 closed 0.03 per cent up at 2,279.55, ending its four-day run of losses. The Nasdaq Composite was also up 0.50 per cent to close at 5,642.65.

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