China stock market

Hong Kong, China stocks join global sell-off amid Washington turmoil

Hang Seng Index loses 0.6 per cent to 25,136.5 on Thursday; Hang Seng China Enterprises Index slides 1.1 per cent to 10,271.4

PUBLISHED : Thursday, 18 May, 2017, 9:06am
UPDATED : Thursday, 18 May, 2017, 6:18pm

Hong Kong stocks recorded their biggest daily drop in two weeks on Thursday as they slid for a third straight trading day.

The decline followed a global sell-off as investors questioned US President Donald Trump’s ability to deliver on his promised reform agendas and infrastructure spending.

The city’s benchmark Hang Seng Index lost 0.6 per cent, or 157.1 points, to close at 25,136.5 on Thursday, and the Hang Seng China Enterprises Index of Chinese companies trading in the city slid 1.1 per cent, or 111.8 points, to 10,271.4.

Financial markets from the US to Europe were roiled on Wednesday as investors began to question the Trump administration’s ability to focus on policy as it careers from one crisis to another.

Major US stock indices tumbled, treasuries rose the most since July and the volatility gauge surged, as traders fled risky assets on concerns about the political uncertainty, including whether the president might be impeached over Russia’s alleged interference in his US election win.

Reports that Trump asked then-Federal Bureau of Investigation director James Comey to end a probe into his former national security adviser have also raised questions over whether he tried to interfere with a federal investigation.

“The Trump turmoil has reduced the risk appetite globally, and Hong Kong stocks are inevitably impacted by the sour sentiment,” said Wang Chen, a partner with Xufunds Investment Management.

Financial and property stocks dropped the most on the Hang Seng Index.

“Hong Kong stocks retreated to follow the loss of US stocks, despite the robust performance of Tencent, which has limited the decline of the markets,” said analysts from Ping An China Securities in a report. “We do not think it is a good time to increase stock holdings before risk appetite recovers.”

China’s second largest internet giant Tencent, the most heavily traded share in Hong Kong, underpinned the weak market, up 1.6 per cent to close at HK$264 on Thursday after reporting a net profit rise of 58 per cent in the first quarter.

Meitu, which offers a beauty-enhancing selfie app, rebounded 0.2 per cent to HK$9.8 after slumping 9 per cent on Wednesday when MSCI reversed course and decided not to include the stock in its global indices.

However, other internet companies dropped, led by Apple parts supplier AAC Technologies Holdings. The company suspended its trading in Hong Kong after falling 9.8 per cent in early trading, the biggest loser among 50 HSI components as short-seller Gotham City Research released a new report to question again the company’s profit margins.

Shentong Robot Education Group lost 4.2 per cent to close at HK$0.1 and Pacific Online decreased 2.1 per cent to close at HK$1.9.

The banking sector also underperformed on Thursday, with all Chinese mainland banks declining in Hong Kong. Postal Savings Bank of China slumped 3.2 per cent to close at HK$4.5 while Bank of China fell 1 per cent to HK$3.9. The world largest bank by assets, ICBC, fell 1 per cent to close at HK$5.1 and Bank of Communications decreased 1.2 per cent to close at HK$5.8.

However, gold producers bucked the weakness of the broader market, taking cues from the strength of bullion futures as investors sought a safe haven. China Hanking Holdings added 1.4 per cent to close at HK$1.4 while King Stone Energy Group increased 1.1 per cent to close at HK$0.2.

Hong Kong builder New World Development dropped 1.4 per cent to close at HK$9.7 while Henderson Land Development declined 1.1 per cent to close at HK$48.9.

Hong Kong’s loss-making flagship carrier Cathay Pacific Airways continued to gain momentum after chairman John Slosar said the airline is making “significant progress” on the restructuring that began early this year. Cathay was the best performer among HSI 50 components, up 2 per cent to close at HK$11.3.

In mainland trading, the Shanghai Composite Index retreated 0.5 per cent, or 14.3 points, to 3,090.1 on Thursday. The Shenzhen Component index dropped 0.6 per cent to close at 9,974.4. The ChiNext gauge of smaller firms fell 0.1 per cent, ending a five-day rising streak.

Seven of the CSI 300 index’s 10 industry groups fell. The exceptions were consumer staples, pharmaceuticals and energy.

Wuxi Rural Commercial Bank tumbled by the 10 per cent daily cap to 16.3 yuan in Shanghai. The stock suffered a fourth consecutive decline after rising to a record last week.

Shandong Gold Mining sank 10 per cent to 32.1 yuan as the company resumed trading on Thursday after being suspended since April 5. The bullion producer said it scrapped a plan to sell shares in a private offering, to fund the purchase of a gold mine in Argentina.

The global sell-off spilled over into other Asian markets in afternoon trading on Thursday, Japan’s Nikkei 225 losing 1.3 per cent and South Korea’s Kospi down 0.3 per cent.

In overnight trading, the Dow Jones Industrial Average and the S&P 500 Index both slumped 1.8 per cent, the biggest losses in eight months, as bank shares led losses. The Nasdaq Composite tumbled 2.6 per cent for its steepest drop since June 24.