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Hong Kong stocks continue to slide amid US election uncertainty

The Hang Seng Index closed down 0.18 per cent at 22,642.62 on Friday, a near 3-month low.

PUBLISHED : Friday, 04 November, 2016, 9:22am
UPDATED : Friday, 04 November, 2016, 9:26pm

Hong Kong stocks continued to decline, reaching a near three-month low at Friday’s close, after the US market logged its longest losing streak since the global financial crisis as fears lingered over the US election.

The Hang Seng Index closed down 0.18 per cent or 40.89 points after swinging between small gains and losses in early trading. The Hang Seng China Enterprises Index, or H-shares index, added 0.1 per cent to 9,491.51.

Investors traded cautiously and market sentiment was dominated by risk aversion ahead of the US presidential election next week, analysts said.

The market turnover in Hong Kong shrank on Friday to HK$50.95 billion, the lowest level in over a month. The automotive sector was the biggest loser, tumbling 0.92 per cent as a group. Geely Auto nosedived 5.34 per cent to HK$7.62 after being cut to “underperform” by Macquarie. Dongfeng Motor Group dropped 1.4 per cent, while BYD slumped 2.61 per cent.

The most heavily trade share, Tencent, dropped 0.99 per cent to HK$200. China’s largest contract chipmaker, Semiconductor Manufacturing International, the second most active share, jumped 8.8 per cent to close at HK$1.11, the highest level in over six years, ahead of its results announcement next Monday.

Macau gaming stock Sands China advanced 0.29 per cent to HK$34.05, after recording a 4 per cent year-on-year increase in its total net revenue for the third quarter.

“US politics remains front and centre [driving the market], ” said Chris Weston, an analyst for IG Group, adding that Donald Trump’s odds of taking the White House have improved as his Democratic rival Hillary Clinton has grappled with the FBI investigation into her email use, and declining public support.

“It’s no surprise then to see traders buying volatility structures and further hedging portfolios, with the US volatility index breaking above 20 and gaining 14 per cent on the session,” he said.

Overnight on Wall Street, the S&P 500 ended down 0.4 per cent at 2,088.66, the lowest level in almost four months. It was the eighth successive decline, marking the longest losing streak since October 2008.

Li Ning, an analyst for Victory Securities, said Hong Kong stocks will be stuck in a downtrend in the short term due to uncertainties related to the US election, sliding oil prices, depreciation pressure on the yuan, and China’s tightening of capital controls to try and stem outflows.

On a weekly basis, the Hong Kong stock market dropped 1.36 per cent, after last week’s decline of 1.8 per cent.

Cao Jiacong, an analyst at China Galaxy International, said investors have already cut risky assets as they are reduce their bets before the election, but he expects a possible rebound of Hong Kong stocks after the race for the Whitehouse concludes.

The fallout from Brexit is another market focus currently. A majority of voters would now prefer the UK to remain in the European Union, a poll conducted by BMG Research has suggested.

Britain’s High Court brought the government’s plans for leaving the EU screeching to a halt, ruling that the prime minister can’t trigger the country’s exit without approval from parliament.

Mainland stock markets also weakened. The Shanghai Composite Index fluctuated in a narrow range and ended Friday 0.12 per cent lower at 3,125.32. The CSI300 index edged down 0.32 per cent to 3,354.17.

The Shenzhen Component Index also dropped 0.39 per cent to 10,702.57. The Shenzhen Composite was down 0.21 per cent to 2067.15, while the Nasdaq-style ChiNext Index dropped 0.37 per cent to 2145.23.

Geely Auto’s closing price was corrected to HK$7.62 from HK$7.65

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