CHINA MARKETS
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China Stock Turmoil 2015

Hong Kong stocks fall as resource shares hit by weak commodity prices

PUBLISHED : Tuesday, 24 November, 2015, 9:06am
UPDATED : Tuesday, 24 November, 2015, 6:42pm

Hong Kong stocks fell on Tuesday as resource shares took a hit after a stronger US dollar sent commodity prices to multi-year lows.

The Hang Seng Index ended down 0.4 per cent to close at 22,587.63 and the Hang Seng China Enterprises Index gave up 0.7 per cent to finish the day at 10,156.63.

Turnover shrank to HK$57 billion, compared with HK$62 billion in the previous session.

The Shanghai Composite Index reversed early losses and edged up 0.2 per cent to close at 3,616.11, as gains in the brokerage sector overcame the weakness in resource stocks. The large-cap CSI300 was flat at 3,753.89. Turnover stood at 328 billion yuan, compared to 329 billion yuan in the prior session.

Shenzhen markets, which are dominated by small to medium-sized companies, saw bigger gains. The Shenzhen Composite Index rose 1.4 per cent to 2,300.09, while the ChiNext Index advanced 1.6 per cent to 2,816.05.

READ MORE: How the ‘great divorce’ between China and US will drive currency and rates markets

Meanwhile, the yuan stabilised on the spot market, after sinking to a three-month low on Monday. Onshore yuan closed at 6.3883 to the US dollar, stronger by 0.01 per cent from Tuesday’s close. The offshore yuan was trading at 6.4307 per US dollar, weaker than the previous day’s 6.4298.

Gold, oil and base metal stocks suffered, after global commodity prices declined on Monday, partly hurt by a strengthening US dollar on growing expectations that the Federal Reserve will increase interest rates in December, for the first time in nine years.

The US dollar hit a seven-month high against the euro on Monday after a Fed official hinted that the US central bank is prepared to raise interest rates in December. On the same day, copper futures sank to a six-year low in London, and nickel slumped to its worst level in more than 12 years. Aluminium, lead, and tin all saw investors reduce their positions.

Gold futures also fell on Monday to their lowest since February 2010, after dropping for a fifth straight week, and crude futures settled lower in New York.

Chris Weston, an analyst for IG Group, said the strength in USD has hurt commodity prices.

“There is no doubt the falls in commodities have been heavily traded by momentum-based funds and conditions for these players have been almost perfect,” he added.

The fundamentals in commodities are “at the low of the cycle”, with the bears seeing China’s diminished demand for commodities and increased prospects of Fed fund rate increase as a reason to short oil, said Evan Lucas, another analyst at IG Group.

In Hong Kong, China Molybdenum tumbled 3.4 per cent to HK$1.7, Jiangxi Copper lost 1.4 per cent to HK$9.43, Aluminum Corporation of China shed 1.2 per cent to HK$2.45, and Lingbao Gold dropped 0.8 per cent to HK$1.19. Energy giant Sinopec gave up 1.2 per cent to close at HK$4.96.

READ MORE: Global markets show few signs of disruption despite rising risks

In Shanghai, Shanghai Coal Energy fell 1.8 per cent to 6.48 yuan, Jiangxi Copper moved down 1.4 per cent to 15.37 yuan, and Aluminum Corporation of China traded 1 per cent lower to 5.22 yuan.

PetroChina, however, bucked the trend in Hong Kong and rose 1.1 per cent to HK$5.71, after media reports said the company and its parent planned to sell their stakes in pipelines and refineries by the end of the year in order to improve its balance sheets.

On the mainland, several brokerage firms posted strong gains, after a Wall Street Journal report said on Tuesday that Beijing has removed a curb that required brokerages to buy more stocks than they sell in daily proprietary trading during the summer market crash. They included Northeast Securities, surging 8.9 per cent to 18.8 yuan, Everbright Securities, up 4 per cent to 24.95 yuan, and Huatai Securities, up 2.7 per cent to 20.70 yuan.

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