Update | Hong Kong stocks fall for a second day as Chinese banks retreat
The Hang Seng Index trades at a discount among the world’s major equity benchmarks; it is a third cheaper than S&P 500 and 5pc less than Shanghai Composite Index
Hong Kong stocks fell for a second day for the first time in six weeks on Tuesday, as Chinese banks and other big caps declined amid concern that this year’s gains have been excessive relative to earnings growth prospects. Mainland stocks also declined.
The benchmark Hang Seng Index dropped 1.09 per cent, or 359.6 points, to 32,607.29, extending Monday’s 0.6 per cent loss. The Hang Seng China Enterprises Index, or the H-share gauge, declined 1.98 per cent.
Market turnover was also down nearly 10 per cent to HK$173.45 billion (US$22.18 billion) on Tuesday, compared with the day before.
Chinese banks and other big caps led the losers, with China Construction Bank declining 2.85 per cent, Industrial and Commercial Bank of China dropping 2.28 per cent, and Bank of China retreating 3.54 per cent, wiping off most of last week’s gains. The three Chinese lenders have advanced at least 15 per cent this year.
“Most of the Chinese banks are at their three-year highs, so it’s reasonable for some investors to take profits and see what will happen next,” said Brett McGonegal, chief executive officer of Capital Link International.
The sell-off in Hong Kong stocks entered a second day after the Hang Seng Index had risen to a record close of 16 times so far this year. Traders began to offload their holdings of Chinese banks and other financial stocks on Tuesday, the best-performing sector this year, to lock in profits ahead of the Lunar New Year.
“A sudden and quick pullback is normal for such a bull market in Hong Kong,” said Wang Chen, a partner at Xufunds Investment Management in Shanghai. “But it looks to me like the bull market hasn’t got too many fundamental problems yet. There’s no bubble in the big-weighted stocks, and valuations are still quite cheap.”