Hong Kong Stock Exchange

Chinese, Hong Kong markets slip on oil amid poor trade figures

PUBLISHED : Tuesday, 08 December, 2015, 9:06am
UPDATED : Tuesday, 08 December, 2015, 8:31pm

Hong Kong and mainland China markets fell their most in two weeks on Tuesday, dragged down by disappointing China trade figures and tracking weakness across regional bourses after crude oil tumbled to a nearly seven-year low amid concerns the major oil producing nations are unable to reach an agreement to curb a growing supply glut.

The tumbling price of crude to around US$41 a barrel Tuesday afternoon sent oil sector stocks falling while airlines outperformed the wider market on expectations lower fuel costs will boost bottom lines. Petrochina shares fell 2.21 per cent to HK$5.30 and CNOOC dropped 3.37 per cent to HK$8.31. Air China rose 1.76 per cent to HK$6.35 in Hong Kong while in mainland trading, China’s six largest airline stocks rose an average 2.6 per cent.

The wider markets closed lower with the Shanghai Composite index down 1.9 per cent to 3,470.07 and the Shenzhen Composite Index finishing off 1.78 per cent at 2221.27. The Hang Seng Index ended 1.34 per cent weaker at 21,905.13 and the Hang Seng China Enterprises Index that tracks mainland companies listed in Hong Kong fell 1.4 per cent to close at 9,660.87.

Around the region, Japan’s Nikkei 225 slipped 1 per cent to 19,492.60 and Australia’s ASX 200 retreated 0.91 per cent to 5,108.60.

Weighing on sentiment, China’s exports in November declined for the fifth consecutive month while imports dropped for a record 13th month. Monthly exports and imports fell 3.7 per cent and 5.6 per cent respectively compared to last year in yuan-denominated terms, according to data released by China’s customs administration. The trade surplus rose to a record US$66 billion for the month, up from US$61.6 billion in October.

Julian Evans-Pritchard, China economist at Capital Economics, took heart from the numbers saying China’s domestic demand was improving.

“We think trade growth ought to pick up over the coming quarters. Stronger growth in China’s main trading partners ought to shore up exports while a policy drive rebound in investment spending will boost imports,” he wrote. “At the same time, the sharp fall in commodity prices at the end of 2014 along with the weakness in exports at the start of this year will soon provide a much more flattering base for comparison.”

Ben Kwong Man-bun, director of KGI Asia, said the markets are forecast to continue lower for the rest of the week as investors hold off until the US Federal Reserve announcement on interest rates next week.

Kwong said clarity on the direction of the US policy rate may end up as a shot in the arm for markets, although he cautioned that conditions are deteriorating.

“The number of decliners outnumbers the gainers. So, you already see that the market weakness is quite significant,” he said. “The foreign exchange reserve holdings by China has also declined; there’s concern about the continuing outflow of capital and also downward pressure on the renminbi – it’s not positive for the market.”

In Hong Kong, shares in Chinese billionaire Pan Sutong’s Goldin Financial and Goldin Properties both surged amid speculation a planned privatisation of the propery operator would complete soon. Goldin Financial jumped 42.93 per cent by the close to finish at HK$16.98 while Goldin Properties leapt 30 per cent before it was suspended mid-day at HK$7.80. The two firms have been some of the market’s more volatile plays this year, both subject of a regulatory concentration warning after it was discovered a small number of shareholders held most of the shares.

Among the airlines, Hainan Airlines rose only 1.28 per cent to 3.96 yuan on the Shanghai market after it announced in a notice to the exchange on Monday evening that a 24 billion yuan pending private placement plan would now shrink to 16.5 billion yuan. The airline’s parent, the HNA Group, has been on a spending spree this year and had to drop its earlier plan to buy between 30 and 40 per cent of the 24 billion yuan placement.