Traders cautiously await signals from US Federal Reserve, leaving China and Hong Kong stocks treading water

Mainland and Hong Kong benchmark indexes were little changed in early trading Monday, as traders weighed uncertainties over the US-China trade war and awaited highly anticipated comments from US Federal Reserve Chairman Jay Powell about interest rates later this week.

Both the Hang Seng Index and the Shanghai Composite Index were essentially flat.

China Tower rose 3.7 per cent, and is now 15 per cent above its initial public offering price when it began trading in Hong Kong on August 8. The operator of telecommunications towers for the world’s biggest cellular phone networks rallied after Beijing awarded China Mobile, China Unicom and China Telecom 5G spectrum licences. The step was seen as showing that China will put national resources behind its 5G roll-out.

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Meanwhile, shares of China auto companies were pounded on the first trading day since China announced late Friday that it was temporarily lifting a 25 per cent surcharge on imports of US-made cars. The three-month reprieve will help US automakers like Tesla, which had raised prices of its models in the world’s largest auto market in the wake of the new duties. Soon after the announcement Friday, Tesla said it was cutting its prices in the mainland.

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Geely Auto dropped 2.8%, while electronic car components and batteries maker BYD fell 3.3%.

The temporary rollback, affecting 144 products including hybrid cars, was a seen as a sign of progress in the trade dispute between the world’s two largest economies. Overall car sales are way down in China, falling 16.1 per cent in November, year on year.

Presidents Donald Trump of the US and Xi Jinping of China agreed to a 90-day trade truce in Buenos Aires earlier this month. Traders have been watching closely for signs of progress to end the trade war. Last week, China purchased up to 2 million tonnes of US soybeans, the first such purchases since the beginning of the trade war in July.

Meanwhile, traders are looking ahead to the US Fed meeting on Tuesday and Wednesday, US time, with the expectation it will raise interest rates by a quarter point. All attention will be on Chairman Powell’s comments on rate increases in the coming year as well as on the outlook for the US and global economies.

Investors are showing less appetite for risk taking, analysts said, a pattern commonly seen towards the end of the year. That was boosting the utility sector on Monday and some property players.

The Hang Seng Utilities Index rose 0.8 per cent, to 57,912.57, and was the top industry gainer during the morning session. Electricity supplier CLP Holdings gained 1.3 per cent, to HK$89.25 and CKI Infrastructure Holdings, with operations stretching from electricity generation and transmission to waste management, was up 1 per cent, to HK$59.40.

Alex Wong, director at Ample Finance Group, said the 90-day truce is not expected to result in a dramatic improvement in China economic data, as the manufacturing sector will not take short-term cues to begin investing in production capacity.

The Chinese economy weakened further in November, data released Friday showed, as retail sales growth decelerated sharply to 8.1 per cent from 8.6 per cent in October. That was below the expected 8.8 per cent in analysts polled by Bloomberg. Meanwhile, industrial production grew at a slower-than-expected pace, at 5.4 per cent in November compared to the previous year.

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Also posting big losses in Shanghai was WG Tech Jiangxi, a maker of glass products, which plunged by the daily limit of 10% to 46.26 yuan. The top loser in the Shenzhen benchmark index was Shanghai RAAS Blood Products, which also dropped 10%, to 9.35 yuan.