Hang Seng retreats from 24,000 on weak southbound flows, falling property stocks

Hang Seng Index was down 1.27 pc to 23,549.52 at Tuesday’s close after rising above 24,000 in earlier trading

PUBLISHED : Tuesday, 11 October, 2016, 9:19am
UPDATED : Tuesday, 11 October, 2016, 10:42pm

Hong Kong markets were down at Tuesday’s close, after retreating from early morning gains that had pushed the Hang Seng Index above the 24,000 threshold for the first time in two weeks.

Mainland stocks extended their rising streak after markets were closed for the “golden week” holiday last week, driven by property, technology, and mining stocks.

The Hang Seng Index lost 1.27 per cent or 302.30 points to close at 23,549.52 while the Hang Seng China Enterprises Index fell 1.20 per cent to 9,804.47. Hong Kong markets reopened today after Monday’s Chung Yeung Festival.

Linus Yip Sheung-chi, First Shanghai Securities’ chief strategist, said the Hang Seng benchmark faced resistance after topping 24,000 on Tuesday morning, reaching the highest level of the year, with high-dividend stocks subject to profit-taking.

“Although investors expected to see a rally, Hong Kong stocks are standing at a high level, and high dividend stocks are particularly expensive,” Yip said.

Leading market losses were coal stocks, which fell 2.74 per cent overall. The real estate sector also suffered, declining 1.22 per cent after a fresh round of market tightening measures dampened mainland property sales.

New World Development shares fell 2.78 per cent to HK$9.78, while Hang Lung Properties dropped 2.94 per cent to HK$17.18. Cheung Kong Property Holdings lost 2.99 per cent.

China Resources Land slumped 3.86 per cent to HK$19.42, extending a nine-day slide. China Overseas Land & Investment slipped 4.19 per cent to HK$24.00.

Profit-taking increased among property stocks, some of which have surged up to 25 per cent in the third quarter, Yip said, and the mainland’s cooling measures on home buying have heaped pressure on developers.

“Home sales in Hong Kong are red hot, but for Hong Kong developers there is still concern over a US interest rate rise and that valuations are high,” Yip said.

While the Shanghai-Hong Kong stock connect link reopened after the Chinese holiday week, southbound capital flows from the mainland were weaker than expected, according to Andrew Sullivan, managing director of sales and trading at Haitong Securities International.

Sullivan said they may have been affected by the Chinese central bank’s fixing of the yuan reference rate at a six-year low on Monday. It could also be the fact Chinese investors were still coming back from their holidays.

“I think that’s a question mark over the market,” he said. “But it is quite possible that those flows will come back tomorrow.”

Investors are also still concerned about the timing of a US interest rate hike, Sullivan said.

He noted the “significant increase” in turnover on the main board from around HK$50 billion at the midday close to HK$85.26 billion at market close.

Among the best performers, China Unicom Hong Kong jumped the most among blue chips after the state-owned company said it was studying mixed ownership reform. Its shares rose 5.63 per cent to HK$9.94.

Gaming stocks had a “mixed review” on Tuesday, Sullivan said. Galaxy Entertainment shares ended the day at HK$32.00, up 2.56 per cent after hitting a year-high of HK$32.6 at one point. Sands China shares advanced 1.15 per cent.

The latest data shows mainland visitors to Macau during the first six days of golden week surged 7.7 per cent year-on-year. Chinese premier Li Keqiang started a three-day visit to Macau on Monday.

Home sales in Hong Kong are red hot, but for Hong Kong developers there is still concern over a US interest rate rise and that valuations are high
Linus Yip Sheung-chi, chief strategist, First Shanghai Securities

In the mainland, the Shanghai Composite Index closed the day up 0.56 per cent or 17.11 points to 3,065.25. The CSI 300, which tracks companies with high market capitalization listed in Shanghai and Shenzhen, increased 0.39 per cent to 3,306.56. The Shenzhen Composite Index gained 0.51 per cent to 2,043.69 while the Shenzhen Component Index rose 0.38 per cent to 10,782.31. The Nasdaq-like ChiNext advanced 0.11 per cent to 2,210.86.

China United Network Communications jumped by its 10 per cent daily limit, closing at 4.8 yuan. Wuhan Iron & Steel Co gained a further 9.87 per cent to 3.34 yuan, having climbed 10 per cent on Monday when its shares resumed trading after halting for merger negotiations with Baoshan Iron & Steel Co.

Elsewhere in Asian trading, Japan’s Nikkei 225 was up 0.98 per cent to 17,024.76. Korea’s Kospi slipped 1.21 per cent and in Sydney the All Ordinaries rose 0.12 per cent.