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Floor traders in the Hong Kong Stock Exchange work on their orders. Photo: Sam Tsang

Live | Hong Kong markets close - first day of Year of the Monkey gives nasty bite as stocks lead Asian losses

Charles Li Xiaojia, chief executive of HKEx, said the stock connect between Hong Kong and Shenzhen will be launched when the market turns more stable

Welcome to the SCMP’s live Hong Kong and China markets. The intense volatility in Chinese markets in 2016 due to the implementation of the circuit breaker roiled world financial markets, with the recent global equity market sell-off sparking further volatility. Investors are increasingly focused on the broader question of how this episode might affect the wider economy of China. We’ll bring you the key levels, trading statements, price action and other developments as they happen.

4:23pm: Laura He

Hong Kong's Hang Seng Index closed down 3.85 per cent or 742.37 points at 18,545.80. The index suffered its worst loss to start a lunar new year since 1994.

The Hang Seng China Enterprises index, or the H-shares index, was off 4.93 per cent or 396.95 points to finish at 7,657.92.

Below is the one-day chart for Hong Kong stock market:  Hang Seng Index (yellow), H-share index (purple). The percentage at the end shows the difference from the opening, not the previous close. Click to enlarge the chart.

 

Read more: Hong Kong stocks suffer worst Chinese New Year debut since 1994

3:13pm: Laura He

Hong Kong stocks continued to lead losses in Asian markets.

At 3 pm, the Hang Seng Index declined 4 per cent or 769.56 points to trade at 18,518.61.

The Hang Seng China Enterprises Index fell 4.91 per cent or 395.79 points to 7,659.08.

Elsewhere, South Korea's Kospi Composite dropped 2.9 per cent to end at 1,861.54. India's Sensex index fell 1.1 per cent to trade at 23,505.63. Australia’s S&P/ASX 200 rebounded 1 per cent to close at 4,821.10 after falling into a bear market in the previous session. Japanese markets were closed on Thursday for a public holiday.

2:53pm: Brendan Clift

Reflecting the positive outlook on gold, Zijin Mining is a standout today, its shares gaining 8.12 per cent to HK$2.13 on turnover of HK$145 million. Zhaojin Mining, Lingbao Gold and China Gold International have all improved by more than 5 per cent.

2:30pm: Laura He

It will 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, said Standard Life Investments on Thursday.

CEIC stands for China Economic and Industry Database, a private data service provider owned by Euromoney
"Chinese officials unveiled their official target of between 6.5-7 per cent for 2016 GDP growth. It is the first time that they set a range, instead of a concrete number. But even with the added flexibility, we believe it will be difficult (for China) to hit the lower end of the target band," said Alex Wolf, an economist for emerging markets at Standard Life Investments.

"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 said.

Wolf also predicted that China could see continued capital outflows in the following months.

"FX reserves data, now becoming one of the most watched monthly data points, pointed to another month of large outflows. Following the January RMB volatility, it would be little surprise to see front-loaded outflows over the next couple of months," he said.

Nevertheless, he added that the pace of outflows may subside as corporate payments on external debt and resident outflows both decline.

2:15pm: Brendan Clift

According to Tianjin Development Holdings, the State Administration of Work Safety of the PRC has suggested an executive director of Tiajin Port (Group) Co, Zhang Lili, be subject to dismissal from employment following an investigation into the Tianjin warehouse blast.

In a Hong Kong Stock Exchange filing this afternoon, Tianjin Development says it became aware of the development via a report posted on the State Administration’s website. It says it has not been notified of the impact on Zhang’s employment and will release further details as they are forthcoming.

Shares in Tianjin Development are down 7.5 per cent to HK$3.46 having dropped sharply since mid-session.

1:42pm: Enoch Yiu

Chinese Gold and Silver Exchange president Steven Chan expected gold price would rise up to US$1,300 per ounce and would not fall below US$1,100 per ounce this year, up from the trading range of US$1,000 to US$1,200 per ounce last year.

“The gold price last year has been affected by the market worries over the US interest rate plan. The weak economies worldwide would mean US would slow down its pace to add the interest rate in the first half of year. The Japan and Europe still keep their interest rate low. These factor would help keep the gold price up,” Chan said.

“In addition, the stock, funds, futures and bonds all have been performing badly, which would also help boosting gold price.”

Monkey-imprinted gold appeared in Hong Kong outlets as investors made tracks back to the sturdy investment. Photo: Bloomberg

 

1:21pm: Enoch Yiu

The local gold market traded at the Chinese Gold and Silver Exchange Society rose on the first trading day in the Year of Monkey with the first trade at HK$11,188 per tael, up HK$570 per tael. Yuan-denominated gold bar trade at 252.95 yuan per lot, up 9.45 yuan. This followed the rise of the US gold market which trade at about US$1,192.96 per ounce on Thursday which is closed to seven month highest level at US$1,200 after US Federal Reserve Chair Janet Yellen indicated there would be only "gradual" adjustments to monetary policy.

Gold is seen as safe bet for investors at stock market slump.

1:11pm: Brendan Clift

The Hang Seng Index starts the afternoon by moving to 18,543.52 points, down 744.65 points or 3.86 per cent on the day.

The China Enterprises Index has traded to 7,675.67 points, down 379.20 points or 4.71 per cent.

Global update, 1.22pm: a tough day for 7 out of 10 markets around the world.

1:08pm: Enoch Yiu

Hong Kong dollar traded at 7.7895 to the US dollar on the first trading day of the Year of the Monkey, firmer by 0.04 per cent.  

The local currency had traded at 7.8008 to the dollar last week, having touched an 8-1/w year low at 7.8294 on January 20. The currency is still weaker by 0.51 per cent this year against the US dollar due to capital outflows as a result of the falling stock market and the US interest rate increase in December

1:00pm: Enoch Yiu

The offshore Chinese Yuan (CNH) on Thursday hit a seven week high as it traded at 6.5390 to the US dollar, up 0.07 per cent from Wednesday's level. The currency had risen three days in a row and now stood at its strongest level since December 25. 

The currency has been rising five weeks in a row, having gained after depreciating more than 2 per cent in the first week of January but is now stronger by 0.43 per cent year to date against the US dollar.

Currency traders believe the People’s Bank of China has been actively intervening in the market ahead of the Lunar New Year break. The mainland onshore yuan market remain close this week and will open on Monday.

Hang Seng market update as of 12.05pm

 

12:30pm: Laura He

China currently faces tight liquidity conditions, as the authority has used much of its FX reserves to defend the yuan against the dollar and the central bank was forced to inject huge amounts of cash into the banking system, according to Jefferies on Thursday.

The recently-released data showed China's January FX reserves have dropped to US$3.23 trillion from US$3.33 trillion in December, which "once again showed the enormous cost of defending the yuan as dollar debt is paid off alongside modest capital outflows", said analysts from the US investment bank.

"Although there remains an open debate about the extent of capital leakage, investors should not forget that the drop in FX reserves is a form of monetary tightening. With investor attention focused elsewhere, the PBOC was forced into an unprecedented open market operation by injecting RMB110bn using reverse repos on Monday. Not only was it a holiday but it came alongside a massive liquidity operation entering the festivities. This can only reflect very tight liquidity conditions within the banking system,” analysts said.

“Indeed, the recent reverse repo operations suggest that the outflows from the commercial banks have overwhelmed the PBOC ‘mini QE’ operations. The central bank is not being able to replace deposits with RMB of its own quickly enough. If the capital flight is left unchecked, interest rates would start to go up, tightening monetary conditions…. If the RMB depreciates too quickly, the dollar amount owed will balloon while banks may not have enough capital to lend domestically to replace the debt. China is caught in a catch-22 situation,” they noted.

Click on chart below to enlarge.

 

 

2:16pm: Enoch Yiu

Mark Haefele, Global CIO, UBS Wealth Management, said:

“Despite a recent market sell-off, we remain neutral on equities in our global tactical positioning. Near-term, the likelihood of more market-friendly central bank statements or action boosting risk asset prices is balanced by the fact there has been little improvement in the key economic indicators we're watching, as well as fresh concerns about credit conditions in Europe.

While we would like to see an improvement in the global growth picture before turning more constructive on equities, we estimate markets are already pricing in a roughly 30 per cent chance of a US recession, and continued central bank policy intervention remains an upside risk for markets. 

Investors should consider utilizing market sell-offs as opportunities to rebalance portfolios toward long-term strategic asset allocation targets. They should also consider being selective in equity exposure. As bond yields fall amid a flight to safety and in anticipation of even looser central bank policy, companies should benefit whose equities offer growing dividends, or are subject to share buybacks.

Our preferred longer-term investment themes include water, emerging markets' healthcare, and security and safety.”

11:41am: Brendan Clift

As Hong Kong resumes trading, the Hang Seng Index (green) tracks other major global indices, including the Dow Jones Industrial Average (orange) and Japan’s Nikkei 225 (purple), into negative territory. Click to enlarge this five-day view.

11:25am: Brendan Clift

The Hang Seng Index has fractionally improved to 18,587.82 points, down 700.35 points or 3.63 per cent since last close.

The China Enterprises Index of H shares stands at 7,696.46 points, down 358.41 points or 4.45 per cent.

Hang Seng’s volatility index is up 16.98 per cent today, reflecting this morning's abrupt correction.

READ MORE: Hong Kong stocks crash in global sell-off as trading resumes after Lunar New Year

11:12am: Enoch Yiu

Secretary for Financial Services and the Treasury Chan Ka Keung said Hong Kong has enough money and a sound system to defend the local currency's peg to the US dollar.

“There are some people who believe the currency speculators are trying to attack the Hong Kong dollar and the peg as what we have seen before,” Chan said.

“The local banking system has ample liquidity while the size of the Exchange Fund and the stock market is much bigger now than before. The peg has served Hong Kong well for the past three decades and we are capable to continue defending the peg. The markets do not need to worry too much,” Chan said.

The last time Hong Kong dollar faced speculative attacks was during the 1997 Asia financial crisis when such attacks pushed up interest rates and the stock market fell.

11:03am: Enoch Yiu

The plan to connect the stock exchanges between Hong Kong and Shenzhen still on but could not be launched amid the current volatile market.

“We have prepared well to launch the Hong Kong and Shenzhen Stock connect for investors to conduct cross border trading of the two markets,” said Charles Li Xiaohia, chief executive of Hong Kong Exchanges and Clearing.

“However, we could only launch such a new scheme when the markets would turn more stable,” Li said.

Li said the HKEx will introduced more derivatives and commodities products for investors to manage their risks.

“Investors would need to be cautious and they would need to gear up their risk management measures to safeguard their investment portfolio amid a volatile market,” Li said.

10:53am: Enoch Yiu

Hong Kong Exchanges and Clearing chairman Chow Chung Kong said there was no surprise in the sharp fall of the market on the first trading day of the Year of the Monkey.

“It is not a surprise to see the stock market fell this morning as the regional and global stock markets have been down during the Lunar New Year, “ Chow said.

Chow said the markets have been worried about the three C – commodities, currencies and China.

“Commodities prices, particularly oil, has gone down sharply. The currencies exchange rate changes have led to capital outflows. China, which is having increasingly influence on the worldwide economy, ia having an economic slowdown. These have hurt market sentiments,” Chow said.

“But Hong Kong has the experience to handle these volatilities. The market has been trading orderly and we do not have problems with the market movement. We believe market turnover and new listings would return to normal when the market stabilises," Chow said.

10:48am: Brendan Clift

The Hang Seng Index has traded flat to 18,549.53 points, down 738.64 points or 3.83 per cent.

The China Enterprises Index stands at 7,686.42 points, down 368.45 points or 4.57 per cent.

READ MORE: Mong Kok riot: 38 charged and to appear in court as Hong Kong asks how New Year’s night turned to violence​

10:40am: Enoch Yiu

Secretary for Financial Services and the Treasury Chan Ka Keung is worried the Monday riot in Mong Kok would undermine of image of Hong Kong in the eye of international investors.

“The prosperity of Hong Kong's financial market would depend on how international investors think of the image of Hong Kong. I want to emphasise to the international investors that it is only a few people who use violence to express their different views and such attitude is not accepted by Hong Kong people. This must be stopped,” Chan said at the opening ceremony of the first trading day after the Lunar New Year.

Chan however think the roit was not the main reason which led to the market falling in Hong Kong on Thursday.

“The investment markets worldwide are worrying about the global economic slow down and uncertainties about central bank policies. This has led to the market downfall. However, we do not need to over worry as the risk management of the local regulatory system is good. We are going to see volatile markets ahead but we do not need to worry too much,” he said.

READ MORE: Timeline and map: how the Mong Kok street hawker hygiene clampdown became a full-scale riot

10:38am: Brendan Clift

HSBC Holdings has dropped 5.16 per cent to HK$49.65 in the first hour of trading. It hasn’t closed below HK$50 for more than four years.

Among stocks registering at least HK$100 million in turnover, the biggest loser is technology firm Lenovo Group, down 8 per cent. Oil major CNOOC is down 7 per cent, followed by Sinopec and insurer Ping An, each down more than 6 per cent. 

10:10am: Brendan Clift

The Hang Seng Index has traded to 18,549.86 points, down 738.31 points or 3.83 per cent, after it opened the day 801 points down.

The China Enterprises Index of major China companies listed in Hong Kong stands at 7,684.53 points, down 370.34 points or 4.6 per cent.

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