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Hong Kong stock market
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Hong Kong stocks erase gains to end flat with China growth fears inflicting monthly loss

  • China’s higher cap for duty-free shopping by mainland visitors to Hong Kong triggered consumption optimism but growth doubts saw investors hitting the exits

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Mainland China tourists at a jewelry and gold shop in Mong Kok. Photo: Yik Yeung-man
Zhang Shidongin Shanghai
Hong Kong stocks reversed gains posted after China relaxed the duty-free shopping limits for mainland tourists to the city and ended flat as investors remained cautious about growth prospects in the world’s second-biggest economy which forced the benchmark into its first monthly loss since January.

The Hang Seng Index gained less than 0.1 per cent to 17,718.61 at the close. Still the benchmark lost 2 per cent in June and capped its first monthly loss in five months. The Hang Seng Tech Index slid 1 per cent and the Shanghai Composite Index rose 0.7 per cent.

Early in the day, sentiment had turned upbeat after China’s commerce ministry said the cap for duty-free shopping by mainland tourists entering Hong Kong and Macau would be raised to 12,000 yuan (US$1,651) from 5,000 yuan. The relaxation is expected to bring additional consumption of as much as HK$17.6 billion (US$2.3 billion) to the city every year, according to the Hong Kong government.
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Online travel agency Trip.com Group gained 0.3 per cent to HK$374.60. Among other leading gainers, China Unicom advanced 3.6 per cent to HK$7.17 and BYD Electronic climbed 3.3 per cent to HK$39.

For the month, sentiment towards stocks soured as investors flocked to the safety of government bonds, amid lack of conviction about a pickup in China’s economic recovery. The latest set of data showed a deceleration of profit growth for industrial companies, falling foreign direct investment and declines in home prices. Overseas investors have pulled US$5 billion out of Chinese onshore stocks in June, the largest monthly outflow since October, according to HSBC.

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“As we have seen, most sectors haven’t had a noticeable improvement in earnings,” said Fan Jituo, an analyst at Cinda Securities. “For the next two months, the market will take a breather and trade sideways. For this to change, it calls for a pickup in earnings and inflows of fresh capital.”

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