Hong Kong stocks slip as investors turn defensive after 4-month rally amid fading US rate-cut bets
- Today’s decline in the city’s stocks took the week’s loss to 3.6 per cent in a slump that has wiped out over US$100 million in value
- Lack of positive earnings surprises and hawkish comments from US Federal Reserve officials further soured risk appetite
The Hang Seng Index fell 1.4 per cent to 18,608.94 at the closing of Friday trading, the fourth straight day of declines that took the benchmark to a two-week low. The Tech Index tumbled 2.5 per cent, while Shanghai Composite Index lost 0.9 per cent.
All but eight of the 82 index members declined. Tencent lost 1.3 per cent to HK$377, e-commerce firm JD.com retreated 3.3 per cent to HK$119.60 and food delivery platform Meituan lost 2.7 per cent to HK$116.30. New World Development lost 3.4 per cent to HK$9.13, Hang Lung Properties weakened 4.3 per cent to HK$7.64 and Hang Seng Bank slipped 2 per cent to HK$110.10, leading declines among local lenders and developers.
Sentiment took another hit on Friday after US business activity accelerated in May, with the US Composite PMI Output Index tracking the manufacturing and services sectors jumped to 54.4. Bets on Fed rate cuts waned with virtually no chance of a cut at the June meeting, according to CME Fedwatch Tool, a barometer tracking the markets expectation of potential changes to the fed funds target rate.
Today’s decline brought the losses this week to 4.8 per cent, the worst weekly loss since January, in a slump that has wiped out over US$100 million in value from the city’s stocks, according to Bloomberg data.
Lack of positive earnings surprises and hawkish comments from US Federal Reserve officials have soured risk appetite, prompting profit-taking on the heels of a four-month rally that propelled the Hang Seng Index to a 10-month high.
“Hong Kong equities recorded resistance from profit-taking activities,” Patrick Pan, strategist at Daiwa Capital Markets, wrote in a note. “We slightly turn defensive in the short term by trimming our positions” in some stocks sensitive to fund flows, he added.
E-commerce firm Alibaba surrendered gains posted after the company said on Thursday it would raise US$4.5 billion by issuing convertible bonds and use the proceeds to fund share repurchases. Its shares declined 0.6 per cent to HK$78.15 in afternoon trading.
Elsewhere, biopharma firm Sunho Biologics surged 7.6 per cent from its IPO price to HK$14.52 on its first day of trading.
Other key Asian markets also fell. Japan’s Nikkei 225 and Australia’s S&P/ASX 200 both dropped 1.2 per cent, while South Korea’s Kospi declined 1.1 per cent.
