Hong Kong stocks surrender gains as investors rattled by corporate profit warnings
- Coal producer China Shenhua Energy said first half profit could have dropped by more than 60 per cent while property giant China Vanke forecast a loss for the period
The Hang Seng Index fell 0.3 per cent to 17,471.67 at the close, the lowest close since April 25. The Hang Seng Tech Index was little changed and the Shanghai Composite Index retreated 0.7 per cent.
Coal producer China Shenhua Energy tumbled after saying first half profit could have dropped by more than 60 per cent. Property developers slid after industry leader China Vanke forecast a loss. Overnight, Ganfeng Lithium and Angang Steel also issued profit warnings.
“The risk of deflation has not faded in China,” said Zhang Zhiwei, chief economist at Pinpoint Asset Management in Hong Kong. “Domestic demand remains weak. Fiscal and monetary policy stance is not expansionary, as real interest rate is high and fiscal spending stays weak. In the long term China will need a rebound of domestic demand to drive the economy. If the Fed enters a rate cut cycle in September, it may open up some policy room for the PBOC [People’s Bank of China] to cut interest rate.”
Hong Kong stocks have been struggling to stabilise after falling 11 per cent from a high in May, with investors locking in profits from a good run spurred by state intervention. A high-profile gathering of the elite members of the Communist Party next Monday may offer some clues as to how top policymakers will help the world’s second-largest economy to overcome headwinds like the property market downturn and muted private sector confidence.