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Hong Kong Stock Exchange

Hong Kong stocks suffer worst Chinese New Year debut since 1994

First day of the Year of the Monkey brings ill fortune for investors

PUBLISHED : Thursday, 11 February, 2016, 9:16am
UPDATED : Thursday, 11 February, 2016, 5:42pm

Hong Kong stocks closed sharply lower on the first trading day of the Year of Monkey on Thursday, posting the worst loss to start a lunar new year since 1994, as traders fled equities for safe-haven assets over fears on declining oil prices, capital outflows from China, and dim economic outlook.

The Hang Seng Index sank 3.9 per cent or 742.37 points to close at 18,545.80. The Hang Seng China Enterprises index, or the H-shares index, finished off 4.9 per cent or 396.95 points at 7,657.92.

“It is not a surprise to see the stock market fell as the regional and global stock markets have been down during the Lunar New Year,” said Chow Chung Kong, chairman of Hong Kong Exchanges and Clearing.

Chow said investors were worried about declining commodity prices, capital outflows spurred by currency fluctuations, and the impact of China’s economic slowdown on the world economy.

“Growth is continuing its structural slowdown and weak property investment, industrial overcapacity, and labour market stresses will continue to exert downward pressure on the economy ...”

Alex Wolf, an economist for emerging markets at Standard Life Investments, also cautioned Thursday that it may be hard for China to reach its 2016 growth target range of 6.5 per cent to 7 per cent, as it faces serious challenges including sluggish property market, overcrowded industrial sector and weak labour market.

“But even with the added flexibility, we believe it will be difficult (for China) to hit the lower end of the target band,” Wolf said, “Growth is continuing its structural slowdown and weak property investment, industrial overcapacity, and labour market stresses will continue to exert downward pressure on the economy.”

He also predicted that China could see continued capital outflows in the next couple of months.

Among market shakers in Hong Kong, Sino-British banking giant HSBC Holdings slid 5.4 per cent to HK$49.5, after Morgan Stanley downgraded its rating of the stock to Underweight from Equal-Weight. China Mobile, another index heavyweight, declined 3.1 per cent to HK$82.

READ MORE: Shenzhen-Hong Kong stock connect set to be delayed for longer due to market volatility

Oil shares also suffered heavily, after crude prices slumped in recent sessions over worries about supply glut and sluggish demand. Refiner Sinopec plunged 6.4 per cent to HK$4.1, offshore oil producer Cnooc tumbled 5.3 per cent to HK$7.45, and state-owned energy giant PetroChina fell 5.1 per cent to HK$4.47.

Crude futures dropped further in Asian trade on Thursday. March WTI crude fell 2.6 per cent to US$26.76 a barrel in the Globex electronic session, after settling below US$28 a barrel in the prior session. April Brent crude traded 1.3 per cent lower at US$30.44.

However, shares of gold miners bucked the weak trend and rose sharply, after gold prices spiked during the Lunar New Year break as investors rushed into safer assets amid increased volatility in global equity markets. Zijin Mining surged 8.1 per cent to HK$2.13. Zhaojin Mining soared 10 per cent to HK$5.08.

“If the China market opens higher that could help to control sentiment in the Hong Kong market. The Hong Kong market has already dropped to quite an attractive level ...”

April gold advanced 1.2 per cent to US$1,218.90 per ounce in Asian trade on Thursday.

Meantime, shares of Tianjin Port Development fell 3.8 per cent to HK1.01, after the company announced that China’s State Council has suggested the company’s chairwoman Zhang Lili should be dismissed from her position following an investigation into the Tianjin warehouse blast. The company said in an exchange filing that it became aware of the development via a report posted on the official website of China’s top work safety authority, but has not been notified about the impact of the suggestion of Zhang’s employment.

China markets are scheduled to resume trading on Monday. Kenny Tang, chief executive officer of Junyang Securities, said he expected to see an injection of positive sentiment ahead of anticipated stimulus announcements next month.

“If the China market opens higher that could help to control sentiment in the Hong Kong market. The Hong Kong market has already dropped to quite an attractive level,” Tang said.

Elsewhere in the region, South Korea’s Kospi Composite dropped 2.9 per cent to end at 1,861.54, and India’s Sensex index fell 2.6 per cent to trade at 23,134.31 in afternoon trade. Australia’s S&P/ASX 200 rebounded 1 per cent to close at 4,821.10 after falling to a bear market in the previous session. Japanese markets were closed on Thursday for a public holiday.

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