bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

hooksAmpRedirectArticle

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

paywallTypes

createdDate

publishedDate

sponsorType

urlAlias

moreOnThisArticles

commentCount

authorLocations

authors

corrections

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

articleSpeeches

socialHeadline

headline

images

flag

firstTopic

glossary

flattenTypeIds

image

relatedLinks

relatedNewsletters

__typename

sponsor

pdfFiles

seriesReverseOrder

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

readingTime

customTimezone

liveContents

SCMP Reporter

China property and commodity counters bear the brunt of the sell-off but insurers are among the gainers

Hong Kong shares fell yesterday on concerns of a slowdown in the Chinese economy following the mainland central bank's announcement of the first rate rise in nine years.

Investors believe the increase marks the beginning of the interest rate normalisation cycle in China.

'Some [market participants] are expecting another rate hike of 25 basis points before the end of this year on the belief that both deposit growth and lending growth will accelerate in the fourth quarter,' one fund manager said.

'Depending on the pace of the rate-hike cycle, I believe it is good for the mainland economy as the government is turning to more market-oriented macro measures than administrative ones.'

The rate rise may have provided an excuse for investors to take profits after the Hang Seng Index jumped 2.14 per cent on Thursday.

'After all, investors were not dumping shares and the Hang Seng Index was staying above the 13,000 resistance level [yesterday],' said one broker.

Bryan Yip, an investment analyst at Standard Life Investments, said: 'We're surprised by the timing of the increase in interest rates, but not by the action. All the economic data has suggested the Chinese government needs to increase interest rates to further cool down the economy.'

Mr Yip remains upbeat on the Hong Kong  market. 'There is ample liquidity in the market. These monies can't sit there without doing anything,' he said. The Hang Seng Index fell 0.45 per cent, or 58.49 points, to 13,054.66, while the H-share index dropped 1.61 per cent, or 73.80 points, to 4,504.78.

Mainland property counters were seriously affected by the rate increase due to fears of higher  development costs and more expensive  mortgages for homebuyers and property investors.

Beijing Capital Land  dropped 10.12 per cent to $1.82, while Shanghai Estate shed 7.89 per cent to 70  cents.

Commodity shares were also hurt on concerns of dwindling demand for basic materials amid a slowing mainland economy.

Jiangxi Copper dropped 7.82 per cent to $4.125, Aluminum Corp of China lost 6.81 per cent to $2.825 and Maanshan Iron & Steel fell 6.03 per cent to $2.725.

Shares in toll roads, however, were in a better shape given their cash-rich nature. Zhejiang Expressway gained 1.94 per cent to $5.25 and Shenzhen Expressway rose 1.82 per cent to $2.80.

Investors were also upbeat on insurers on hopes of improving investment income from the rate rise.

'Interest rate hikes would have a bigger positive impact on life insurance in China than on property and casualty companies,' said a broker.

Ping An Insurance soared 4.7 per cent to $12.25, China Life Insurance gained 3 per cent to $5.15 while PICC Property & Casualty added 0.9 per cent to $2.80.

Li & Fung gained 3.6 per cent to $11.50 on  buying from institutional investors after the global sourcing company announced its acquisition of Ralsey.

China Unicom dived 4.31 per cent to $5.55 after it reported disappointing third-quarter results. Its net profit for the third quarter stood at 1.2 billion yuan, with its CDMA business posting a loss of some 80 million yuan after making a  50 million yuan profit in the first half of this year. GSM revenue was down in the third quarter on lower average revenue per user.

Rival China Mobile lost 0.66 per cent to $22.60.

CNOOC fell 4.76 per cent to $4 after its chief financial officer, Mark Qiu Zilei, resigned on Thursday.

'This is not a big surprise, despite his previous denials on similar speculation in the past six months,'  another fund manager said.

China Eastern Airlines dropped 1.34 per cent to $1.47. The mainland airline recently announced strong third-quarter results, indicating a strong operating environment.



Mainland rate rise puts the brakes on stock rally