Escalating North Korea tensions roil Hong Kong market

Investors turn back on equities and pile into safe-haven assets such as gold and Japanese yen as tension escalates on Korean peninsula

PUBLISHED : Monday, 04 September, 2017, 9:11am
UPDATED : Monday, 04 September, 2017, 10:27pm

Hong Kong stocks closed lower on Monday for a third consecutive session, amid broader weakness in the region, as investors turned away from equities towards safe-haven assets after tension escalated on the Korean peninsula following North Korea’s sixth and most powerful nuclear test.

South Korea said on Monday it believed its northern neighbour was preparing to launch a ballistic missile following its most powerful nuclear test explosion over the weekend.

Early in the day, South Korea’s military conducted a live-firing exercise to simulate a strike on North Korea’s nuclear test site.

Tensions prompted investors to dump risky assets like equities and pile into haven assets, such as gold and the Japanese yen.

Hong Kong’s benchmark Hang Seng Index declined 0.8 per cent, or 212.9 points, to close at 27,740.26. The Hang Seng China Enterprises Index, known as the H-share index, fell 0.9 per cent, or 102.88 points, to 11,182.67. Daily turnover reached HK$87.7 billion.

Elsewhere in the region, Japan’s benchmark Nikkei Average dropped 0.9 per cent at 19,508.25, and its broader Topix index ended down 1 per cent at 1,603.55. South Korea’s Kospi lost 1.2 per cent, and Australia’s S&P/ASX 200 shed 0.4 per cent.

“The North Korea news was an excuse for the Hong Kong market to correct,” said Gordon Tsui, managing director of Hantec Pacific, adding the Hang Seng Index has already gained for eight consecutive months and up almost 30 per cent since the start of this year.

The market weakness was a reaction to renewed geopolitical tensions, said Stanley Chik, an analyst for Bright Smart Securities.

“Given other uncertainties this month, including the upcoming Fed policy meeting and German elections, it may be difficult for Hong Kong stocks to extend their winning streak following an eight-month rally,” Chik said.

Index heavyweight Tencent dropped 1.3 per cent to HK$322. China Mobile also lost 1.3 per cent to HK$81.85.

China Shenhua tumbled 3.6 per cent to HK$19.58, the worst performer among blue-chip stocks.

However, Apple-related shares bucked the weak trend and advanced broadly ahead of the US tech giant’s iPhone 8 event next week.

Aac Technologies, which supplies acoustic components for Apple’s iPhones, rose 2 per cent to HK$144.9. Tongda Group soared 11.6 per cent to HK$2.41. Cowell E Holdings spiked 22 per cent to HK$5.17.

Gold miners also gained, with Lingbao Gold rising 7.5 per cent to HK$1.72, and Zhaojin Mining up 4.4 per cent to HK$7.13.

In the mainland, stocks closed modestly higher. The Shanghai Composite Index rose 0.4 per cent to 3,379.58.

The large-cap CSI 300, which tracks large caps listed in Shanghai and Shenzhen, added 0.4 per cent to 3,845.62.

Tech shares rose, as Shenzhen-listed Hanwang Technology surged 10 per cent to 36 yuan, and Shanghai-traded Shenzhen Huiding Technology tacked on 8.9 per cent to 101.08 yuan.

The Shenzhen Composite Index and the Nasdaq-style ChiNext Index finished up 0.6 per cent and 1 per cent respectively at 1,968.12 and 1,883.62.

US markets will remain closed on Monday for a public holiday and resume trading on Tuesday.