Hong Kong, China markets lower for the week, analysts warn of likely downbeat open Monday
The Hang Seng index and China Enterprises index both end 2.2 per cent lower
Hong Kong and Chinese markets ended the week lower as falling commodity prices and weak Chinese credit growth weighed on sentiment, with markets tipped to open lower Monday after mainland Chinese regulators announced late Friday a surprise tightening in margin requirements.
Energy companies were hammered after crude oil prices fell to a two-month low amid a wider commodities sell-off after the US dollar strengthened ahead of a US rate rise expected next month.
PetroChina fell 3.9 per cent to HK$5.70 and Sinopec dropped 4.8 per cent to HK$5.11. Shares in commodities trader Glencore fell 7.6 per cent to HK$11.66.
“The commodities price dropped on Thursday night while both US and European markets were down on Thursday night. This affected the Hong Kong and China markets and the outlook for next week is not looking good,” said Louis Tse Ming-kwong, director of VC Brokerage.
“The bad debt problems and economic slowdown would continue to drag down the banking and insurance stocks. The depreciation of the yuan also led overseas investors to avoid Chinese stocks.”
The onshore yuan eased further to hit a six-week low on Friday, closing at 6.3735 against the US dollar, the lowest since September 25 when it traded at 6.3737.
The Hang Seng index finished 2.2 per cent lower at 22,396.14 closing down 2.1 per cent for the week. The China Enterprises index finished 2.2 percentage points lower at 10,181.47, its biggest one day fall in six weeks.
In China, the Shanghai Composite Index dropped 1.4 per cent, to 3,580.84, off 0.2 per cent for the week, while the Shenzhen Composite closed the day 2.4 per cent lower at 2,205.56.
After the market close Chinese regulators announced that margin requirements will be raised to 100 per cent from 50 per cent effective November 23 in a move likely aimed at curbing speculation. The rule means margin traders will need to stump up additional collateral in order to buy stocks on borrowed money.
Hong Kong and mainland futures fell on the news in after hours trading.
“This might impact the market but it is likely the right decision as it will eventually decrease volatility. It is a trade off between the long-term stability of the market and the short-term impact,” said Gerry Alfonso, director of Shenwan Hongyuan Securities in Shanghai.
Financials companies were among the biggest decliners Friday after mainland credit conditions deteriorated in October. Aggregate financing for the month increased by a weaker-than-expected 477 billion yuan, the smallest monthly rise since July last year. There was also a large decline in new medium, and long term corporate loans, while new mortgage loan growth slowed to its lowest level since April.
“Chinese consumers are doing alright but the recovery elsewhere is stalling,” wrote Tim Condon, head of research at ING Asia.
Weak Chinese trade data released last weekend was followed by mixed consumer sales and industrial production numbers midweek, a reminder that China’s government is still wrestling to stabilise its economy despite repeated interest rate cuts.
HSBC shares dropped 2.5 per cent to HK$61.05 and China Construction Bank shares were off 2.9 per cent at HK$5.44.
Shares in Apple Daily publisher Next Digital jumped 7.41 per cent to 58 Hong Kong cents after it was spotted that activist shareholder David Webb had bought a 5.02 per cent earlier this month. Webb told the South China Morning Post he liked Next’s transition to digital and planned to discuss “governance areas that could be improved” with the management.