Hong Kong stocks dragged lower amid US election jitters

Hang Seng Index drops 0.56pc to 22,683

PUBLISHED : Thursday, 03 November, 2016, 9:22am
UPDATED : Thursday, 03 November, 2016, 10:48pm

Hong Kong stocks slumped to their lowest level since August 12 on Thursday, as investors pared risk ahead of the US elections next week.

The city’s benchmark Hang Seng Index gave up early gains and closed 0.56 per cent or 126.99 points lower at 22,683.51. The Hang Seng China Enterprises Index, or the H-share index, was down 0.4 per cent or 37.86 points to 9,482.01.

Investors were looking ahead to US elections on Tuesday and the prospects of a December rate hike, said market watchers.

Traders and analysts honed in on polls that suggest Hillary Clinton’s lead against Donald Trump has continued to narrow.

“A Trump win will bring big uncertainty on financial markets, and now the election result is very difficult to predict,” said Hanna Li Wai-han, a strategist at UOB Kay Hian (Hong Kong). “Hong Kong markets are expected to remain volatile before the election and will be driven the US election news.”

On Wednesday, the Fed concluded its two-day meeting and decided to keep interest rates unchanged, but signalling that it may raise them next month.

“The Federal Reserve have effectively given the green light to a December rate hike, that is as long as we don’t see a major disruptive event playing out between now and December 14,” said Chris Weston, an analyst for IG Group.

He said that uncertainties have driven investors to safe haven assets such as the Japanese yen, the Swiss franc and gold.

“We have reached a point where there is a buyers’ strike, where money managers have reduced their risk, increased cash allocations within the portfolio and are happy to ride out this mini-storm of uncertainty,” Weston said.

“This is a perfect breeding ground for short sellers who love the combination of uncertainty and lack of bids,” Weston added.

However, Li said the possibility of a December rate hike is unlikely to heighten downside risks to Hong Kong stocks, as the market has partially discounted the rate rise, but the unknown is the outcome of the presidential election. “Global financial markets will be relieved if Hillary Clinton wins,” Li said.

On Thursday, turnover in Hong Kong was HK$54.88 billion yuan, with each of the top five most actively -traded shares ending lower.

Hong Kong Exchanges & Clearing fell 1.4 per cent to HK$200.20, after posting a 30 per cent year-on-year fall in net profit for the first three quarters. Chinese PC maker Lenovo Group declined 0.81 per cent to HK$4.87, ahead of its upcoming first-half earnings.

Wynn Macau slumped 4.7 per cent to HK$11.46, its lowest close in more than two months. In a pre-market filing on Thursday the casino operator controlled by Las Vegas gaming mogul Steve Wynn posted US$8.6 million loss for the three months ended September 30, compared with a net profit of US$62.1 million for the same period last year.

Access headaches at new Palace casino leave hefty dent in Wynn Macau’s quarterly earnings

On the mainland, the Shanghai Composite Index rose 0.84 per cent to 3,128.93. The CSI300 index moved up 0.95 per cent to 3,365.09.

The Shenzhen Component Index also ended higher, rising 0.48 per cent to 10,743.96. The Shenzhen Composite advanced 0.56 per cent to 2,071.59. The Nasdaq-style ChiNext Index added 0.32 per cent to 2,153.19.

Among sectors, mainland brokerages rose amid optimism over the upcoming launch of the Shenzhen-Hong Kong Stock Connect later this month. China Merchants Securities jumped 2.2 per cent to 18.38 yuan, while Huatai Securities gained 1.98 per cent to 21.07 yuan and Southwest Securities improved by 1.7 per cent to 7.39 yuan.