China stock market

Hong Kong stocks close at lowest level since 2012 even as China makes modest recovery

PUBLISHED : Tuesday, 12 January, 2016, 9:13am
UPDATED : Wednesday, 13 January, 2016, 11:51am

Hong Kong’s markets closed at the lowest level in more than three years on Tuesday after ceding morning gains even as major indexes in mainland China steadied somewhat amid continuing uncertainties over the economy and currency volatility.

The Hang Seng Index closed down 0.89 per cent at 19,711.76, its lowest since September 6, 2012.

The Hang Seng China Enterprises Index, which tracks mainland-based companies, finished at 8,439.31, down 0.77 per cent.

Market analysts said the decline reflects investors’ lack of confidence in China’s economy, with many remaining worried about further shocks in the market and fluctuations in the currency.

“The surprising thing is that the Asia market actually stabilised. In the afternoon, there was selling pressure. Many investors just want out, so cash is king right now,” said Francis Lun, chief executive of GEO Securities. “Everybody fears this may be the lowest level. It could go even lower – the short-term target is 19,000. Maybe at 19,000, the market will stabilise.”

Although sectors like jewellery and watches, hotels and banking made slight gains, many sectors continued to bleed, with agricultural products, mining, and health and personal care losing about 2 per cent on average.

Banking stocks increased 0.17 per cent in the afternoon while media shares saw rapid gains. HSBC edged up 0.27 per cent to HK$56.5 and Singtao Group rallied 9.9 per cent to HK$1.33.

“For banking, I’m quite surprised to see it rebound,” said Ivan Li, equities analyst at Tung Shing Securities. “For the media...stocks are pretty unaffected by the macro theme (of China’s economy) and have been sort of a safe haven.”

In mainland markets, the Shanghai Composite Index closed at 3,022.86, up 0.20 per cent. The CSI300 inched up 0.74 per cent to 3,215.94.

The Shenzhen Composite Index closed at 1,855.39, up 7.29 points. The ChiNext rose 1.95 per cent to 2,147.53.

Lun said Beijing’s intervention in the offshore renminbi market shows the central bank is determined not to let deregulation “get out of hand”. The People’s Bank of China’s (PBOC) efforts to curb currency speculators led CNH Hibor, the interbank rate for offshore yuan in Hong Kong, to shoot up to 200 per cent on Tuesday afternoon after a record high fixing of 66 per cent in the morning.

According to Li, investors will be keenly watching export data from China due tomorrow for more clues on the economy.

“Last week, we saw quite a big divergence between the level of onshore and offshore renminbi,” Li said. “I think the market is speculating or is testing the PBOC’s determination to keep the currency stable.”