Hong Kong stocks chalk up weekly loss as rate-hike fears outweigh positive China economic data

The Hang Seng Index trimmed a larger loss early in the session, after key August economic data from China exceeded economists’ projections
Sands China and other Macau gaming operators rallied on expectation that they will retain their gambling concessions despite a new bidder

Hong Kong stock market

Zhang Shidongin Shanghai

Published: 10:27am, 16 Sep, 2022

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Hong Kong stocks dropped, sending the benchmark to a third straight weekly loss as traders weighed positive August economic data from China versus the prospect of policy tightening by the Federal Reserve.

The Hang Seng Index fell 0.9 per cent to 18,761.69 at the close on Friday, trimming a loss of as much as 1.3 per cent earlier in the session, after China economic data for August exceeded forecasts. The 73-member gauge retreated 3.1 per cent for the five-day period.

The Hang Seng Tech Index lost 2.7 per cent, while the Shanghai Composite Index slipped 2.3 per cent, the biggest decline in almost four months. China’s onshore yuan weakened to 7.0226 against the US dollar, breaching the 7 yuan level against the dollar for the first time since 2020.

The weakness in local stocks mirrored the soured mood on other regional and US markets, as traders are braced for the US Federal Reserve to raise borrowing costs by at least 75 basis points next week on the back of a hotter-than-expected inflation report.

Topping the list of decliners on the Hang Seng Index, property developer Country Garden Holdings sank 7.6 per cent to HK$2.42, and coal producer China Shenhua Group slid 4.5 per cent to HK$24.55. Hong Kong Exchanges and Clearing fell 2.6 per cent to HK$295.60, and Alibaba Group Holding shed 1.5 per cent to HK$86.80.

China’s key August economic data all exceeded economists’ projections, reflecting that recovery from the damage of the Covid-19 outbreaks is still under way.

Industrial production rose 4.2 per cent from a year earlier in August, the national statistics bureau said on Friday morning. That topped the estimate of a 3.8 per cent increase. Retail sales climbed 5.4 per cent and fixed-asset investment grew 5.8 per cent in the first eight months, according to the official data. Both exceeded analysts’ forecasts.

“We have yet to see a significant pickup in demand and credit expansion, and there will probably be the roll-out of more stimulus packages after the Party Congress in October,” said Xu Tingquan, a fund manager at HSBC Jintrust Fund Management in Shanghai. “The external risk for Hong Kong stocks is still lingering. If the Fed does more than it should do to fight inflation, it will negatively impact the inflows to the emerging markets in Asia.”

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Macau gaming stocks bucked the downward trend, regaining some of the ground they lost on Thursday on expectations that the existing industry players will retain their concessions. Six existing casino operators and a unit controlled by Malaysian billionaire Lim Kok Thay are due to make presentations to the government on Friday as part of the tender process for casino licenses in the gambling hub.

Sands China gained 3.8 per cent to HK$18, and Galaxy Entertainment rallied 2 per cent to HK$43.85. Wynn Macau climbed 0.4 per cent to HK$4.82, and MGM China advanced 1.2 per cent to HK$4.25.

Other major markets in the Asia-Pacific region all headed south as strong US employment data and a surge in yield for two-year Treasuries reinforced expectations about more aggressive interest-rate hikes by the Fed. Declines in the stock gauges in Australia and Japan all exceeded 1 per cent on Friday, while South Korea’s Kospi fell 0.8 per cent.