Daily Report

Banking stocks slip as fears persist over clampdown on wealth management products

PUBLISHED : Thursday, 28 July, 2016, 9:11am
UPDATED : Thursday, 28 July, 2016, 10:45pm

Mainland banking giants weighed down Hong Kong shares on Thursday amid fears regulators were mulling a clampdown on wealth management products, despite the Federal Reserve’s decision to put a rate hike on ice triggering a rally among local property developers.

The benchmark Hang Seng Index snapped a three-day winning streak to settle down 0.20 per cent or 44.65 points at 22,174.37, while the Hang Seng China Enterprises index lost 0.36 per cent or 32.44 points to 9082.85.

In the mainland, automakers and industrials jumped, offsetting dismal performances of financial firms, with the CSI300 Index of the largest listed companies in Shanghai and Shenzhen lifting 0.1 per cent to 3,221.14.

The retreat in Hong Kong markets came after jittery investors sold financial majors on speculation that mainland regulators planned to curb stock investments by China’s wealth management businesses in order to mitigate risks.

China Construction Bank, the second most-traded stock on the Hong Kong bourse, slid 0.75 per cent, while Bank of China shares tumbled 0.9 per cent.

Insurer shares also headed south, led by the third largest Asia-based player AIA Group, despite a less-than-expected decline in net profit for the first half to US$2.065 billion. It shed 1.21 per cent on Thursday.

“Although the benchmark index pulled back a bit after days of gains, we still believe the Hong Kong market will fare well given the bulk of uncertainty over an imminent US Fed rate hike has diminished,” said Linus Yip Sheung-chi, First Shanghai Securities chief strategist.

We still believe the Hong Kong market will fare well given the bulk of uncertainty over an imminent US Fed rate hike has diminished
Linus Yip Sheung-chi, First Shanghai Securities chief strategist

Yip said he saw the Hang Seng Index continuing to rise in the weeks, ever rising as high as the psychologically-important 23,000 point level.

The Fed left interest rate unchanged on Wednesday, prompting a rise in Hong Kong developers.

Wheelock Properties climbed 2.59 per cent and Sun Hung Kai Properties advanced 2.076 per cent to hit a more than 11 months high.

A softening US dollar due to the Fed’s decision to fend off a rate hike also boosted gold prices, as key mainland gold miners Zhaojin Mining soared 6.84 per cent and Zijing Mining leapt 4.61 per cent.

Consumer stocks, automakers in particular, were among the best performers both in Hong Kong and the mainland. Dongfeng Motor rose 5.26 per cent thanks to strong earnings from Peugeot SA, partially owned by the Chinese carmaker.

China Vanke, the mainland’s largest residential developer, surged 11.53 per cent, the biggest rise in more than six months, after news portal ThePaper.cn reported its chairman Wang Shi went to the headquarters of China Resources for a possible meeting.

Tech Pro shares plunged 86 per cent on Thursday on a report by activist short-seller Glaucus Research, who gave the company a strong sell rating with a target price of zero.

Ivan Li, Tung Shing Securities equities analyst, said the market would remain “relatively quiet” with some profit-taking, following the advances of recent days.

“I’m bullish on casino stocks going forward, with the upcoming Macau gaming revenue figures likely to bottom out.”