Hong Kong stocks lose steam ahead of MSCI decision on A-shares’ inclusion

Hang Seng finishes 0.3pc down at 25,843.04. MSCI’s decision on whether to include A-shares in its emerging markets index due Tuesday evening, New York time

PUBLISHED : Tuesday, 20 June, 2017, 9:15am
UPDATED : Tuesday, 20 June, 2017, 6:37pm

Hong Kong stocks reversed from early gains, showing waning momentum in the market ahead of MSCI’s decision, due on Tuesday evening New York time, on whether to include mainland A-shares in its emerging markets index.

The Hang Seng Index finished 0.3 per cent lower or 81.51 points to 25,843.04 while the Hang Seng China Enterprises Index fell 0.5 per cent or 52.32 points to 10,468.48.

“There is a strong resistance at the 26,000 level in the Hang Seng Index,” Hannah Li, strategist at UOB Kay Hian. “Tomorrow’s MSCI decision is crucial as a positive surprise could push the index much higher.”

A number of funds have given more than a 50 per cent chance on MSCI’s acceptance of A-shares after rejecting the mainland shares in each of the past three years.

In any case, any inclusion is expected to increase China’s weighting to only 0.5 per cent in the MSCI Emerging Markets index.

Any weighting increase larger than 0.5 per cent would be a positive surprise and boost the Hang Seng Index further, Li said.

Tomorrow’s MSCI decision is crucial as a positive surprise could push the index much higher
Hannah Li, strategist at UOB Kay Hian

The telcommunications sector was among the losers, with China Mobile dropping 0.4 per cent to HK$83.70, China Telcom falling 0.3 per cent to HK$3.77 and PCCW down 0.2 per cent to HK$4.37.

Among the other most heavily traded stocks, Ping An dropped 0.4 per cent to HK$51.90, China Life fell 1.0 per cent to HK$24.05 and HSBC slid 0.6 per cent to HK$68.50.

The price of oil hit a seven-month low with US oil futures down 1.2 per cent to close at US$44.2 per barrel, as several oil countries agreed to increase oil supply, which dragged down several oil stocks.

Sinopec slipped 0.2 per cent to HK$6.35, PetroChina lost 1.0 per cent to HK$4.92, but Kunlun Energy reversed to gains, up 0.9 per cent to HK$6.50.

Guangzhou Rural Commercial Bank debuted trading on Tuesday morning and closed at HK$5.11, marginally up from its listing price of HK$5.10.

Mainland Chinese stocks ended lower on Tuesday after swinging between losses and gains. The Shanghai Composite Index dropped 0.2 per cent or 4.36 points at 3,140.01 while the CSI 300 – which tracks the large caps listed in Shanghai and Shenzhen – fell 0.2 per cent or 7.18 points to 3,546.49.

The Shenzhen Composite Index rose 0.1 per cent or 2.21 points at 1,879.05 and the Nasdaq-style ChiNext rose 0.3 per cent or 18.33 points to 1,820.98.

Markets in the rest of the region were mixed on Tuesday. Tokyo’s Nikkei 225 gained 0.8 per cent or 162.66 points to 20,230.41, South Korea dropped 0.1 per cent while the Sydney All Ordinaries lost 0.7 per cent.

All three major US indices closed up overnight with the Dow Jones Industrial Average hitting a record high, up 0.7 per cent to 21,529, and the S&P 500 adding 0.8 per cent to 2,453. The Nasdaq Composite was up 1.4 per cent to 6,239.