Hong Kong stocks fall on Friday, posting the biggest weekly loss in two months
Mainland China stock markets rebound after a four-day decline
Hong Kong stocks posted their biggest weekly loss in two months on Friday, closing lower than the previous session. Mainland stocks rose for the first time this week, but still logged their steepest drop since December 2016.
The benchmark Hang Seng Index dipped 0.12 per cent, or 40.31 points, to 32,601.78 on Friday, extending Thursday’s 0.8 per cent decline. However, the Hang Seng China Enterprises Index, or the H-share gauge, rose 0.78 per cent as mainland stocks staged a V-shaped rebound in the afternoon.
“It’s just technical adjustment. The bull market in China is far from peaking,” Ji Mo, chief economist for Asia excluding Japan of Amundi Hong Kong, said on Friday.
Gaming stocks were the biggest losers after news broke that China is drafting rules to allow gambling on Hainan Island, a move that would end Macau’s lottery monopoly. Galaxy Entertainment Group dropped 2.01 per cent and MGM China Holdings lost 1.45 per cent, after both stocks recovered from as much as 5 per cent losses in the day.
Chinese telecom equipment maker ZTE Corporation rose 3.96 per cent to HK$27.60, thanks to preliminary results that showed the company has returned to profit after losing 2.36 billion yuan in 2016.
In mainland trading, the Shanghai Composite Index rebounded 0.44 per cent to 3,462.08, after a near 1 per cent decline during the morning session. The gauge lost 2.68 per cent this week, the steepest for the five-day period since December 2016.
The Shenzhen Composite Index, which is dominated by smaller companies, also edged up 0.03 per cent, after declining around 2 per cent during the day.
Metals and coal stocks led the afternoon rally in Shanghai. Jiangxi Copper rose by the daily 10 per cent limit to 21.52 yuan in Shanghai. Yunnan Chihong Zinc & Germanium also increased by the maximum cap to 7.91 yuan and Yunnan Copper added 8.38 per cent. Coal miner Inner Mongolia Xingye Mining gained 6.07 per cent, and Zijin Mining Group was up 5.91 per cent.
The intraday sell-off mainly stemmed from some highly leveraged products investing in stocks that were being liquidated as they matured, and any rollover was unlikely because of the nationwide deleveraging drive, Haitong Securities said.
Expectations about the implementation of stricter rules on asset-management products and more disappointing earnings results “led to the flight of highly leveraged funds and caused a crash in illiquid small-caps,” said Qin Peijing and Yang Lingxiu, analysts at Citic Securities, the nation’s biggest listed brokerage.
The repercussion of the recent turbulence will take some time for the market to digest as the declines may trigger further selling of stocks that are pledged as collateral, said Xun Yugen, a strategist at Haitong. He recommended investors to stick to financial companies owing to their steady earnings growth.