Hong Kong stocks fall as investors take profits after four-day gains

Hong Kong stocks ended the week lower after a historic crash of the British pound and an overnight retreat in US equity markets ahead of the release of September jobs data in the US.

The Hang Seng Index was down 0.42 per cent or 100.68 points at 23,851.82, and the Hang Seng China Enterprises index dropped 0.23 per cent or 23.28 points to 9,923.82.

Linus Yip, chief strategist at First Shanghai Securities, said the market was seeing some profit-taking after the Hang Seng climbed 655 points in the first four trading days of October, reaching an almost one-month high on Thursday. It also comes ahead of the market close on Monday for the Chung Yeung Festival, a traditional holiday during which many people visit their ancestors’ graves to pay respects.

But “the market right now is still passive,” Yip said.

He noted Chinese property players were under pressure Friday, with China Overseas Land falling 1.18 per cent to HK$25.05 and China Residential Land slipping 1.46 per cent to HK$20.20.

Meanwhile, coal stocks continued their ascent on surging oil prices, rising 4.04 per cent overall. China

Shenhua gained 0.63 per cent to HK$15.94 and Yanzhou Coal advanced 1.71 per cent.

But major oil companies gave back some of their gains from the past few days, with PetroChina down 0.90 per cent and Sinopec Corp falling 0.34 per cent. While sentiment about oil is strong following OPEC’s agreement earlier this week to cut production, Brent crude oil for November delivery is still shy of US$50 a barrel, at US$49.06. Investors may still be cautious ahead of OPEC talks next week to implement the output cuts, according to Yip.

“Oil prices right now are still going up,” he said. “Today [we] have some profit-taking also because [oil players] have already shot up in the short-term.”

Hong Kong trading was thin at HK$52.19 billion, down from HK$54.51 billion on Thursday, as investors stayed on the sidelines, awaiting US non-farm payrolls data due for release Friday evening. The employment numbers will provide clues as to the timing of the next interest rate hike in the US.

“[The] US non-farm payrolls tonight is the only game in town,” Rodrigo Catril, a currency strategist at National Australia Bank, wrote in note Friday. “Potentially some fireworks tonight.”

Economists surveyed by Bloomberg forecast the data on Friday will show the US economy added 172,000 jobs in September, up from 151,000 a month earlier.

“The US interest rate hike expectations are still there,” Yip said. “It will make the market turn to a more wait-and-see attitude.”

But in early trading Friday, the market was focused on the British pound’s dramatic plunge to a three-decade low, at one point falling 6 per cent in two minutes, over concerns about the UK’s exit from the European Union.

“Global markets are being battered by a series of shocks,” Citi analysts wrote in a note. “The latest is the fear of a ‘hard Brexit’. Such price action in one of the world’s most liquid currencies could understandably add to investor nervousness.”

Yip said the drop in the pound brought “some uncertainties to the market,” particularly for companies with business in the UK. Consequently, HSBC fell 0.67 per cent and Standard Chartered Bank slipped 1.61 per cent.

Chinese mainland stocks will reopen on Monday after the holiday break. The closure of the Shanghai-Hong Kong Stock connect trading link has halted southbound flows this week, but Yip said capital inflows from the mainland to Hong Kong are the most important focus for the market going forward.

In the near term, the Hang Seng will fluctuate within a range of 23,150 and 24,300 points, as it has been since September, Yip said.

Overnight on Wall Street, US stocks closed lower. The Dow Jones Industrial Average lost 0.07 per cent or 12.53 points to close at 18,268.50. For September, the index finished 0.8 per cent lower but on a quarterly basis, it was up for 2.1 per cent in the third quarter.

The S&P 500 jumped 0.05 per cent or 1 point to close at 2,160.77. For the month, it finished 0.1 per cent lower, but gained 3.3 per cent in the last quarter.

In Asian trading on Friday, Japan’s Nikkei 225 lost 0.23 per cent to 16,860.09. South Korea’s Kospi fell 0.56 per cent and, in Sydney, the All Ordinaries dropped 0.29 per cent.