Update | Hong Kong stocks snap five-day rally after North Korea fires missile over Japan

Hong Kong stocks fell for the first time in six days on Tuesday on concern about geological tensions after North Korea fired a missile over northern Japan.

The Hang Seng Index dropped 0.4 per cent, or 98.28 points, to 27,765.01, ending a five-day, 3 per cent gain. The Hang Seng China Enterprises Index, or the H-share gauge, also retreated 0.4 per cent. Trading volumes on the city’s bourse were 11 per cent below the 30-day average, according to data compiled by Bloomberg. Mainland’s equity benchmarks rose for a third day.

Traders sold stocks and snapped up gold as a safe haven after the missile passed over Hokkaido, Japan’s northernmost main island, around 5:06am Hong Kong time, broke into pieces and landed in the waters off its east coast, according to Japanese broadcaster NHK. It was Pyongyang’s second missile firing in three days after three short-range ballistic missiles launches failed on Saturday. Spot gold prices rose 1.2 per cent to US$1,325.62 an ounce, the highest level in 11 months.

“North Korea’s missiles have triggered risk-aversion market sentiment, but selling isn’t too serious,” said Louis Tse Ming-kwong, a director of VC Brokerage. “It is unlikely this will lead to any real action from the US. Accelerated state-owned enterprise restructuring and a stronger yuan are positive to China and Hong Kong stocks.”

Equity losses were limited as the onshore yuan rose 0.3 per cent to 6.5954 against the US dollar, the strongest level since June 2016. The Hang Seng Index is the best performer among Asian markets this year with a 26 per cent gain, thanks to a stronger yuan and as lower valuations spurred fund inflows from mainland investors through the exchange link programmes.

Financials led the decline on Tuesday, with Bank of China falling 0.2 per cent to HK$4.10 as the most heavily traded stock on the Hang Seng Index. HSBC slipped 0.7 per cent to HK$74.80 and China Construction Bank lost 0.3 per cent to HK$6.98. China Life sank 1.6 per cent to HK$24.90 and AIA Group eased 0.9 per cent to HK$59.25. Ping An Insurance Group edged down 0.2 per cent to HK$62.90.

Internet giant Tencent Holdings slid 1 per cent to HK$319.80, extending a 1.6 per cent decline on Monday.