China, Hong Kong benchmarks rebound, defying big sell-offs in region over Apple train wreck

China and Hong Kong stocks defied big sell-offs in Asia in Friday trading, with the Shanghai Composite capping its biggest gain in a month, as suspected state buying and bargain-hunting of beaten-down companies propped up equities reeling from the world’s worst performance last year.

Apple suppliers in Asia, however, took another pounding, after an overnight rout in US equities spilled over to the region.

The Shanghai Composite Index jumped 2.1 per cent, or 50.51 points, to 2,514.87, at the close. The benchmark ended up the week with a 0.8 per advance, its first run of gains for the five-day period in a month. In Hong Kong, the Hang Seng Index added 2.2 per cent, or 561.67 points, to 25,626.03, notching up a weekly gain of 0.5 per cent.

Japan’s Nikkei 225 index sank 2.3 per cent on its first trading day of the year and Taiwan’s Taiex, which hosts a deluge of exporters, slid 1.2 per cent. The latest volatility in US markets was largely sparked by Apple lowering its sales projection for the first time in almost two decades on waning demand in China.

In the US, investors shifted out of stocks into bonds overnight on angst about slowing growth, sending the S&P 500 Index down by 2.5 per cent and pushing yields on 10-year Treasuries to an 11-month high.

Hong Kong stocks down a wretched 14 per cent in 2018 – the worst performance in 7 years

In Hong Kong, AAC Technologies Holdings, which relies on the maker of iPhones for 57 per cent of its sales, fell 0.7 per cent to HK$40.75 after dropping as much as 4 per cent. In Japan, Murata Manufacturing, which sells ceramic capacitors to Apple and Samsung Electronics, tumbled 9.8 per cent. Taiwan Semiconductor Manufacturing lost 3.5 per cent for a third straight day of losses in Taipei.

What should traders of Hong Kong, China stocks expect after a year of ‘heaven to hell’?

As Apple’s slump roiled stock markets, investors piled into gold as a safe haven, driving the price of the precious metal past the key US$1,300 level. The stocks of jewellers rose, with Luk Fook Holdings International rising 1.1 per cent while Shanghai Yuyuan Tourist Mart, which owns one of Shanghai’s oldest gold jewellers, rose 2.1 per cent.

Apple shares dropped to their lowest level in a year and a half in the US.

But mainland traders seemed to be hunting for bargains after the Shanghai Composite fell to a four-year low and the Hang Seng gauge had its worst start to the year since 1995.

“The two markets are a bit oversold technically as we saw heft losses previously. So there is a temporary relief,” said Wang Zheng, chief investment officer at Jingxi Investment Management in Shanghai.

“And also, there appears to be some buying from the national team on the mainland to support the market,” he added, referring to large funds called on by Beijing to calm market volatility.

Shanghai’s stock index ends 2018 as the world’s biggest loser as trade war, slowing Chinese economy weigh on confidence

The rise on Friday on mainland and Hong Kong benchmarks occurred as Beijing confirmed “proactive and constructive” US-China trade talks will be held next week. These will be the first face-to-face talks since Presidents Donald Trump and Xi Jinping agreed to a 90-day trade truce last month. The trade war has roiled China markets, but is being some of the recent upheaval in US markets as well.

China confirms ‘proactive and constructive’ US trade talks in Beijing next week

In the mainland, brokerages rallied on speculation about possible state intervention to shore up the market. Seventeen out of the 44 listed brokerage surged by the 10 per cent daily limit, among which were Southwest Securities, Sealand Securities and Central China Securities.

In Hong Kong, health care companies led the rebound in equities. They were hammered recently by fears of price cuts following a pilot programme of bulk procurement by the government. CSPC Pharmaceutical Group surged 10 per cent to HK$11.08 and Sino Biopharmaceutical added 8.4 per cent to get to HK$5.02. The two stocks, which had dropped at least 37 per cent over the past month through Thursday, were the best performers on the Hang Seng Index on Friday.

In the initial public offering market, Zhejiang Cangnan Instrument Group, a maker of gas measurement instruments, dropped 9.8 per cent from its offer price to HK$14.26 on its first day of trading on Friday.

Two earlier IPOs hit the market on Thursday. Weigang Environmental Technology, a waste incineration disposal company, traded just up from its IPO price of 89 HK cents on debut, ending at 90 HK cents. It closed Friday at 88 HK cents.

Shares of Jiangsu Zijin Rural Commercial Bank, which was listed in Shanghai, surged by the maximum 44 per cent to trade at 4.52 yuan. It ran up to the 10 per cent limit Friday to close at 4.97 yuan.