Stocks set to fall at open, authorities pledge smooth market operations as Occupy protests extend
More selling expected as Occupy Central spurs investors to cash out, with the Hang Seng Index suffering biggest intraday loss in seven months
Hong Kong equities face fresh selling pressure today after investors were left reeling by the worst intraday fall in nearly seven months as thousands of demonstrators took to the streets in pro-democracy Occupy Central protests.
The Hang Seng Index yesterday dropped 1.9 per cent to close at a 10-week low of 23,229.21 points, after notching the biggest intraday loss of 2.46 per cent since February 4.
Fund managers expect the market to be volatile in the coming weeks, with retailers and property developers likely to bear the brunt of speculative selling on concern retail sales will suffer if protests drag on and fears the city's economic competitiveness will weaken because of political uncertainty.
Property shares were the biggest losers yesterday, falling 3.38 per cent on average across the sector, while finance shares traded in line with the broad market with a loss of 1.92 per cent.
Property companies were singled out in a March report by Swiss investment bank UBS as among the most vulnerable to financial fallout from Occupy Central protests, with Hongkong Land Holdings, the biggest landlord in Central, and Wharf (Holdings), which owns two of the city's most popular shopping malls, Harbour City and Times Square, seen as especially vulnerable.
Wharf fell 3.75 per cent to close at HK$55.20. It was the third-biggest loser among developers following New World Development, which dived 4.57 per cent to HK$9.19, and Sino Land, off 4.49 per cent at HK$11.92.
Singapore-listed Hongkong Land lost 1.02 per cent to finish at US$6.78.
Some developers could still have further to fall, based on UBS estimates. It gave Great Eagle Holdings, one of the city's biggest hotel owners and operators, a target of HK$24.60, 8.38 per cent lower than yesterday's close. Hang Lung Group, which owns offices in Central, was targeted at HK$36.60, 4.81 per cent off.
"Sector-wise, retailers and landlords are the ones to be affected most, while for residential property developers, as long as they maintain their primary market sales at a robust level, their share price would bounce back once the protest ceases," Mio said. "Meanwhile, we see a buying opportunity for China-related stocks, as fundamentally this protest does not affect them."
Jewellery firms - the major beneficiaries of big-spending mainland tourists - fell on expectations visitors might stay away to avoid the protests. Chow Tai Fook Jewellery Group lost 3.78 per cent to close at HK$9.93, while Chow Sang Sang Holdings International dipped 3.67 per cent to HK$18.92.
Financial plays were relatively unscathed, despite 23 banks announcing the temporary closure of 44 branches.
Financial markets operated smoothly, with the city's securities and derivatives markets running as usual. The Hong Kong Monetary Authority said it would keep the interbank market and currency board mechanism operating normally.
Charles Li Xiaojia, the chief executive of Hong Kong Exchanges and Clearing, said the protests would add to market uncertainty in the near term and urged investors to trade "calmly and rationally".
"The protest will definitely create short-term uncertainty and volatility," Li said.
TOP LOSERS
New World Development 4.57%
Sino Land 4.49%
Wharf (Holdings) 3.75%
China Resources Power 3.74%
Cheung Kong (Holdings) 3.71%
BOC Hong Kong (Holdings) 3.70%
Sun Hung Kai Properties 3.69%
Hang Lung Properties 3.63%
China Mengniu Dairy 3.60%
Galaxy Entertainment 3.44%
