Hong Kong oil stocks thumped as crude prices fall below US$50 threshold

Hang Seng drops 1 per cent, but analysts play down continued depreciation of the yuan, insisting currency’s slide is ‘controllable’

PUBLISHED : Wednesday, 26 October, 2016, 9:16am
UPDATED : Wednesday, 26 October, 2016, 10:11pm

Hong Kong and mainland stocks traded lower on Wednesday, hurt by a sell-off in energy stocks as crude oil prices dropped below the US$50 threshold amid oversupply concern.

The Hang Seng Index fell 1.02 per cent or 239.68 points to end at 23,325.43, while the Hang Seng China Enterprises Index lost 1.41 per cent to 9,698.85.

“We have seen small ups and downs in recent days as investors adjust their position before October’s stock futures enter the settlement day on Thursday. Besides this, there is no special trigger in the market,” Kwok Sze-chi, Bright Smart Group marketing director said.

Turnover fell 6 per cent to HK$52.1 billion, with southbound net inflow through Shanghai-Hong Kong Stock Connect falling slightly to 1.17 billion yuan (HK$1.34 billion) from 1.28 billion yuan on Monday.

Most blue chips decreased, led by energy stocks, with coal sector retreating 2.05 per cent from gains earlier this week and oil sector shares falling 1.64 per cent as a group.

China Petroleum & Chemical Corporation shares lost 2.21 per cent to HK$5.76, the biggest one-day drop in two weeks before announcing its third-quarter results on Thursday.

CNOOC shares fell 2.06 per cent to HK$10.48 while PetroChina Company dropped 2.13 per cent to HK$5.52.

The sell-off came after crude oil prices fell below US$50 threshold amid concern of rising output.

US West Texas Intermediate lost 1.1 per cent to US$49.96 while Brent crude futures also fell in value.

Iraq said the country should be excluded from the production cut deal, despite being Opec’s second largest oil producer.

The American Petroleum Institute showed that US oil inventories grew by 4.8 million barrels last week, compared with Reuters’ analysts forecasts of only 1.7 million barrel.

Macau casino operator Galaxy Entertainment shares surged 1.91 per cent to HK$32.05, after hitting its one-year high of HK$32.65 at one point, after it reported a 28 per cent year on year increase in profit for the third quarter ended September 30. Sands China shares also gained 1.28 per cent to HK$35.5.

In the mainland, all major indices inched down, with the Shanghai Composite Index falling 0.5 per cent or 15.6 points to 3,116.31, while the CSI 300 – which tracks the large caps listed in Shanghai and Shenzhen – dropped 0.38 per cent to 3,354.8. The Shenzhen Component Index fell 0.5 per cent to 10,817.51 while the Nasdaq style ChiNext dropped 0.71 per cent to 2,184.49.

However, analysts shrugged off concern that the depreciation of yuan would dampen stock market sentiment.

“Its downtrend is not that volatile, [it] will not have that much impact on the market,” said Kenny Tang, general manager of securities and asset management at AMTD Financial Planning, adding he expected the yuan to depreciate in a controllable way.

The onshore yuan in Shanghai has lost 1.4 per cent against the US dollar so far this month to trade at six-year lows.

“China markets were not frightened by yuan’s depreciation recently as the fall was gradual,” Kwok said. “It is more like a catalyst for stock markets because mainlanders need to reduce yuan deposits and allocate in other assets for extra gains to hedge the currency’s depreciation,” Kwok said.

Among other sharp movers in Hong Kong, Belle International Holdings was the worst performing blue chip for the second day in a row, with its shares closing 3.94 per cent lower at HK$4.87 due to worse than expected quarterly results.

Greatwall Motor plummeted 11.46 per cent to HK$8.11, as a year-on-year net profit increase of 16.1 per cent for the first nine months this year missed analysts’ forecasts.