Hong Kong stocks end lower following Yellen comments, mainland markets notch solid gains

Hong Kong’s Hang Seng ends 0.3 per cent lower

PUBLISHED : Thursday, 03 December, 2015, 9:26am
UPDATED : Thursday, 03 December, 2015, 9:06pm

Hong Kong stocks ended lower on Thursday, as investors weighed up prospects for the first interest rate tightening in the US in almost a decade, following the latest comments by US Fed Chair Janet Yellen on what will be unveiled at this month’s policy meeting. Mainland Chinese share markets ended higher.

Hong Kong’s benchmark Hang Seng Index lost 0.3 per cent, or 65.14 points, to close at 22,414.55. The benchmark rose in the past two days following the International Monetary Fund’s inclusion of the yuan in its reserve currency basket effective October 2016.

The H-share Index, tracking mainland-based companies, fell 0.6 per cent, or 62.52 points to close at 9,987.84.

“The Hong Kong market is more affected by international markets than the mainland market. After the US Fed Chair Janet Yellen signalled interest rates can rise this month, the US stock market went down, and hence the dip in Hong Kong market,” said Louis Tse Ming Kwong, director of VC Brokerage.

Tse said regional markets would likely remain soft through year end as new share listings in Hong Kong and mainland China would soak up funds from investors.

“China’s economic outlook is not good. The government’s stimulus plans targets large state-owned enterprises but not small and medium-sized companies. Many regional governments and small companies are finding it hard to repay their debts,” he said.

The mainland market were little affected by the escalation in rate hike expectations in US.

The Shanghai Composite inched up 1.4 per cent, or 47.92 points, to close at 3,584.82, following its biggest daily rally for a month on Wednesday. The CSI300 Index added 0.7 per cent, or 27.34 points, to 3,749.30.

The Nasdaq-style ChiNext jumped 3.6 per cent, or 94.86 points, to 2,708.12. The Shenzhen Composite Index closed 2.50 per cent higher , or 54.63 points, to 2,243.94.

Qiao Yongyuan, a strategist with Guotai Junan Securities, said “investors are repositioning, as they expect new liquidity to be pushed into the stock market”.

He added that a Central Economic Work Conference meeting due to be held later this month, may result in the introduction of additional stimulus measures to shore up growth.

"We suggest increased allocation to companies in sectors including property, infrastructure construction and finance,” said Qiao’s team in a note on Thursday.

On energy markets Wednesday, the benchmark US oil price tumbled below $40 a barrel for the first time since August.

Chinese oil producers were under pressure throughout the morning session, but recovered in the afternoon after Energy Intelligence reported Saudi Arabia would propose a cut of 1 million barrels per day (bpd) in OPEC output, to help restore balance to the market.

PetroChina closed 2.1 per cent higher at 8.82 yuan in Shanghai, while Hong Kong-listed shares pared a sharper decline to end 0.53 per cent lower at HK$5.67.

The People’s Bank of China set the reference rate of the yuan at 6.3982 per dollar, its weakest level in three months. Onshore yuan closed at 6.3972 per greenback, 0.02 per cent stronger from Wednesday, while the offshore yuan was trading at 6.4467 per dollar US dollar in late afternoon trade.

All three major US indices closed lower overnight after Fed Chairwoman Janet Yellen remarked that she “don’t need unanimity” in making decisions, bolstering expectations that the Fed will hike interest rates for the first time in almost a decade at the conclusion of its two-day meeting on December 15.

“On balance, economic and financial information received since our October meeting has been consistent with our expectations of continued improvement in the labour market,” Ms. Yellen said in her speech on Wednesday.

“Continuing improvement in the labour market helps strengthen confidence that inflation will move back to our 2 per cent objective over the medium term.”

The markets will look ahead to the November jobs report, due out Friday, for further clues. Data including inflation-adjusted hourly compensation, released by the US labour department on Wednesday showed the employment was improving.