CHINA MARKETS
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China Stock Turmoil 2015

Hong Kong stocks end modestly lower ahead of Fed minutes for October

Mainland markets drop for a second straight session

PUBLISHED : Wednesday, 18 November, 2015, 9:10am
UPDATED : Wednesday, 18 November, 2015, 6:19pm

Hong Kong’s stocks ended Wednesday with minor losses, as investors awaited the release of the US Fed’s October meeting minutes for clues to whether a rate tightening cycle could be about to get underway in December.

The mainland China markets fell for a second day, pressured by investors’ concerns over ongoing fallout following last revelations that more high ranking officials are being investigated as part of investigations into corruption.

The Hang Seng Index closed 0.3 per cent, or 75.99 points lower at 22,188.26. The H-share Index, tracking mainland companies eased 0.2 per cent, or 18.15 points, to 10,055.28.

The U.S. Federal Reserve was scheduled to release minutes from its October meeting at 2.00 pm on Wednesday Eastern time, which would be 2.00 am in Hong Kong on Thursday.

Kevin Leung, a strategist with Haitong International Securities, said a clear position statement from the Fed about the rate hike was crucial to the Hong Kong market in the coming weeks.

“It is more about removing the uncertainties. Positive or negative, the market will find a direction.”

“The minutes of the October FOMC meeting will likely add further weight to a December lift-off,” said Societe Generale analysts Michala Marcussen and Klaus Baader in a note. “We expect the Fed to manage dollar pressures by adjusting the subsequent pace of rate hikes, and this is likely to be emphasised strongly.”

On the mainland, investigation into high ranking officials at China’s top securities regulator continues. Caixin reported on Wednesday afternoon that Xi Longsheng, head of internal inspection at the China Securities Regulatory Commission (CSRC), was being questioned in connection with an investigation into Yao Gang, vice chairman of the CSRC.

Adam Xu, a mutual fund manager based in Shanghai said the investigation into Yao marked an intensified battle gainst not only market misconduct, but could also be viewed as part of the broader anti-corruption campaign.

“Any clearing up of wrong doings from inside trading to general graft is positive to the market, theocratically speaking,” Xu said.” But the uncertainties brought by the great shake-up in China’s finance and political circles are also making investors confused and hesitant in making investment decisions.”

The benchmark Shanghai Composite Index fell 1 per cent to close at 3,568.47, while the CSI300 fell 1.1 per cent, or 42.81 points to 3715.58. The Shenzhen Composite Index lost 1.9 per cent, or 41.30 points, to 2,189.88. The Nasdaq-style ChiNext dropped 2.1 per cent, or 55.89 points, to 2,661.17.

Banks outperformed in the afternoon session. China Citic Bank, owned by financial service conglomerate Citic Group, jumped 9.3 per cent in Shanghai to 8.13 yuan. Its Hong Kong-listed share advanced 1.2 per cent to HK$5.15.

The lender said Tuesday it would team up with Baidu to set up a virtual bank that could tap into Baidu’s vast online users network.

Property stocks also advanced, as Shanghai-listed Poly Real Estate surged 6.3 per cent to close at 9.7 yuan, and China Vanke advanced 4.8 per cent to 14.67 yuan in Shenzhen. Vanke’s Hong Kong-listed shares advanced by 4.7 per cent to HK$19.34.

China’s new home prices rose 0.1 per cent in October from a year earlier, compared with a 0.9 per cent on-year drop in September, according to Reuters calculations based on official statistics released earlier in the day.

Citic Securities, a leading brokerage firm ended 2.9 per cent higher at 20.78 yuan in Shanghai. Its Hong Kong share rose 3.3 per cent to close at HK$19.20 . The company announced Tuesday that its 64-year-old chairman Wang Dongming will retire after the next board election.

In the currency markets, the yuan continued to weaken. The onshore yuan was quoted at 6.3834 per US dollar, down 0.10 per cent. The offshore yuan was trading 6.4125 per US dollar in late afternoon quotes.

With additional reporting by Enoch Yiu