China stock market

China markets slip, with Hong Kong stocks falling to 7-month low as US tariffs loom

Health care and pharmaceuticals, as well as firms with exposure to US market lead declines

PUBLISHED : Wednesday, 04 July, 2018, 10:31am
UPDATED : Wednesday, 04 July, 2018, 7:01pm

Stocks in Hong Kong dropped to their lowest closing level in seven months on Wednesday led by heavy selling in pharmaceuticals and tracking declines in shares on mainland China, as the deadline for the White House to impose the first round of tariffs on Chinese goods draws nearer.

With the Trump administration set to implement US$34 billion of tariffs on imports of Chinese goods on Friday, Beijing is expected to retaliate with equivalent measures, elevating the current verbal conflict between the world’s two largest economies into a real trade war.

The Hang Seng Index dropped 1.1 per cent, or 303.9 points, to 28,241.67, marking the lowest close since December 6. On Tuesday, it touched a four-month low of 27,990.45 before finishing at 28,545.57, failing to make a clean break below the 28,000 level, where market players said was forming a strong support for the coming days.

“The benchmark index should fluctuate around these levels as people stay cautious ahead of Friday’s tariffs,” said Stanley Chan, research director at Emperor Securities.

The Hang Seng China Enterprises Index dropped 1.5 per cent, or 159.56 points, to 10,712.64.

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Health care and pharmaceuticals led the declines. CSPC Pharmaceutical Group slid 8.2 per cent to HK$21.25, the worst-performing blue chip. Genscript Biotech dived 9.5 per cent to HK$18.86 and China Shineway Pharmaceutical Group lost 8.6 per cent to HK$13.84.

Companies with the most exposure to the US market also performed poorly. Sunny Optical Technology Group lost 4.4 per cent to HK$138 and AAC Technologies Holdings shed 3.8 per cent to HK$103.90.

Internet giant Tencent Holdings closed 2 per cent lower at HK$383, knocking 59 points off the benchmark index.

Among Chinese developers, Sunac China Holdings was down 5.4 per cent to HK$25.45. Country Garden Holdings slumped 5.8 per cent to HK$12.72 on reports that it was halting expansion in tier 3, 4 and 5 Chinese cities to secure cash flow, which the developer said were untrue.

The benchmark index should fluctuate around these levels as people stay cautious ahead of Friday’s tariffs
Stanley Chan, Emperor Securities

However, utilities and power producers bucked the declines after the Hong Kong government announced a regulated capital expenditure of HK$26.6 billion and HK$52.9 billion on CLP Holdings and HK Electric Investments respectively, between 2019 and 2023.

CLP gained 3.9 per cent to HK$87.60 and HK Electric rose 4.4 per cent to HK$7.83. Among other local utilities, CKI Infrastructure Holdings increased 2.8 per cent to HK$59.95 and Power Assets Holdings added 1.54 per cent to HK$56.20.

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Mainland stocks fell back on Wednesday, shrugging off yesterday’s rebound brought about by soothing comments from the People’s Bank of China that indicated that the central bank would keep the Chinese currency stable and not use it as ammunition in the trade conflict with the US.

The Shanghai Composite Index dropped 1 per cent, or 27.76 points, to 2,759.13 while the CSI 300 – which tracks the large caps listed in Shanghai and Shenzhen – decreased 1.3 per cent, or 45.53 points, to 3,363.75.

The Shenzhen Composite Index slid 2 per cent, or 31.24 points, to 1,563 while the Nasdaq style ChiNext eased 2.6 per cent, or 41.51 points, to 1,565.61.

Other Asian markets were also lower on bearish sentiments. Japan’s Nikkei 225 fell 0.3 per cent, or 68.60 points, to 21,717.04. South Korea’s Kospi was down 0.3 per cent to 2,265.46, while in Sydney, the All Ordinaries dropped 0.5 per cent to 6,273.70.