Hong Kong stocks finish lower amid weaker oil prices and renewed concerns about China’s financial health
Brokers say investor confidence hammered by yuan’s slide to a fresh four-year low
Hong Kong trading was overshadowed on Friday by the sudden disappearance of Fosun Group chairman Guo Guangchang, and while shares in his mainland and Hong Kong-listed entities were suspended, local markets fell for a seventh consecutive day to its worst weekly close in three months.
The declines came on the back of weaker oil prices and renewed concerns about China’s financial health. Mainland stocks also fell finishing out the session on a five-week low.
Guo disappeared on Thursday prompting suspicions he was the latest target in China’s sweeping anticorruption campaign. Investors reacted nervously to the news sending shares in Guo’s Fosun International down 15.78 per cent in Frankfurt and 11.43 per cent in New York overnight on Thursday.
One of the most aggressively run Chinese conglomerates, Guo’s whereabouts will likely be a major headache for Fosun’s sprawling international operations, which include resort operator Club Med, analysts say.
“It has a very significant impact when something like this happens and it typically throws an enterprise into chaos,” said Steve Vickers, the chief executive of Steve Vickers and Associates, a specialist risk Consultancy.
“Often it means deals go on hold, and officials or employees become reluctant to make decisions. Other partners tend to adopt a wait and see attitude.”
However, Louis Tse Ming-kwong, a director at VC Brokerage, said the wider impact on the local stocks was muted as “the market is (already used) to this kind of news”.
The Hang Seng index fell 1.11 per cent to 21,464.05 points on Friday, its lowest close since September 30, and finished the week down 3.47 per cent. The H-share index dropped 1.51 per cent to 9,308 points, 5.35 per cent lower for the week.
Onshore and offshore yuan rates traded at four-year lows. Onshore yuan closed at 6.4552 to the US dollar while the offshore yuan traded at 6.5304.
Weaker financial stocks weighed on the market with HSBC off 0.5 per cent at HK$60.05 and insurer AIA down 2.1 per cent at HK$46.65.
“Default risks for Chinese issuers are likely to increase in 2016 following a record number of defaults in 2015,” analysts at ratings agency Standard & Poor’s wrote in a report released on Thursday evening. Chinese firms took on too much debt and are now struggling with weak cash flows amid a slowing economy, the report said.
In Shanghai, the main index dropped 0.61 per cent to 3,434.582 points, down 2.56 per cent for the week, and in Shenzhen the leading index fell 0.72 per cent to 2,195.857 points, off 1.67 per cent week-to-date.
Energy shares fell in China and Hong Kong as Brent crude oil prices slipped below US$40 a barrel. Petrochina shares fell 1.74 per cent to HK$5.08 and CNOOC slipped 2.82 per cent to HK$7.94. Beaten down in recent months, shares in commodities giant Glencore soared 11.52 per cent to HK$10.54.
“Many sectors are losers … because investors don’t want to buy at the moment. Insurance, those infrastructure stocks, some pharmaceutical stocks … I think the weakness will continue until the Fed meeting,” said Ben Kwong Man-bun, director of KGI Asia.
The US Federal Reserve’s two-day policy board meeting is due to start on December 15 and most analysts expect US interest rates to rise for the first time in a decade.
Cosmetics retailers shares in Belle International and Bonjour were hammered on Friday. Belle stock fell 8.73 per cent to HK$6.06 while Bonjour plunged 11.46 per cent to 43 HK cents.