Hong Kong Stock Exchange

Hong Kong stocks close lower as US dollar strengthens, oil rallies

Hang Seng sheds 0.19 per cent to 22,280.53 as US dollar index spikes for fifth day in a row

PUBLISHED : Wednesday, 16 November, 2016, 9:08am
UPDATED : Wednesday, 16 November, 2016, 6:17pm

Hong Kong stocks reversed earlier gains to close lower on Wednesday on the strength of the US dollar, following an overnight rebound in US markets amid surging oil prices.

The Hang Seng Index ended the day down 0.19 per cent, or 43.38 points, to 22,280.53 and the Hang Seng China Enterprises index lost 0.38 per cent, or 35.56 points, to 9,362.54.

Investors believe the Hang Seng is undergoing a downward trend and they anticipate further corrections, said Castor Pang Wai-san, head of research at Core Pacific-Yamaichi International (HK).

There is “very weak market momentum” from a strong US dollar index, which rose for the fifth day in a row, hurting capital going into emerging markets, Pang said.

The US dollar index traded 0.12 per cent higher at 100.23.

There are also continued concerns over a US interest rate rise next month, according to Ben Kwong Man-bun, a director with brokerage KGI.

“The stronger dollar and [the likelihood of a] US December rate increase both continue to weigh on Hong Kong stocks,” Kwong said.

Losses were led by China Overseas Land and Investment, which sank 2.64 per cent after announcing the resignation of its chairman.

Local property companies also underperformed, with Sino Land dropping 2.44 per cent to HK$11.20 and Cheung Kong Property down 0.98 per cent to HK$50.70.

This followed news that a growing number of real estate buyers in the city have defaulted on their agreements following an increase in stamp duty for non-first time purchasers.

The divergence between the Shanghai and Shenzhen stock markets tells investors they may have the chance to take some profits
Castor Pang Wai-san, Core Pacific-Yamaichi International

The banking sector slipped on Wednesday, with Hang Seng Bank losing 2.18 per cent to HK$143.30 and China Construction Bank shedding 1.27 per cent to HK$5.46.

Hong Kong institutional investors are currently reshuffling their portfolios from technology and China stocks back to international banking and finance stocks, Pang said.

“If that continues to happen the heavily rated stocks like China Mobile, Tencent, or the China banking players ... will continue to be dumped by investors,” Pang told the Post.

China Mobile fell 0.47 per cent to HK$84.40, but index heavyweight Tencent rallied on Wednesday ahead of its third quarter results announcement, up 1.92 per cent to HK$196.90.

Energy companies were among the best performers on Wednesday, with Chinese offshore oil giant CNOOC gaining 1.78 per cent to HK$9.73 and PetroChina gaining 0.97 per cent to HK$5.21.

Renewed expectations that Opec may soon reach an agreement to reduce global oil production drove US crude up 6 per cent on Tuesday to settle at US$45.81 per barrel.

Reuters reported that Opec’s secretary general Mohammed Barkindo will travel to member nations over the next several days to discuss the deal ahead of the group’s meeting in Vienna on November 30.

But Pang noted there is still a possibility that Opec countries will not reach an agreement on production cuts, particularly as Iran just announced the development of three new oil fields.

AAC Technologies, the world’s top supplier of miniature audio components for consumer electronics products, was the biggest gainer among blue chips, surging 2.79 per cent to HK$70.10.

Separately, the Shenzhen Stock Exchange announced it would carry out a fifth system test on Saturday, paving the way for the official launch of the highly anticipated stock connect trading mechanism with Hong Kong.

However, Kwong said he doesn’t expect a strong impact from the new link. “To some extent, the new connect will lift the Hong Kong market, but not substantially,” Kwong added. “Mainland capital will not blindly rush to Hong Kong if the market is volatile.”

In mainland China, markets in Shanghai pulled back while Shenzhen indices rebounded.

The Shanghai Composite Index was 0.06 per cent lower to 3,205.06 while the CSI 300 — which tracks the large caps listed in Shanghai and Shenzhen — was down 0.01 per cent to 3,429.59.

The Shenzhen Component index closed up 0.09 per cent at 10,968.08, the Shenzhen Composite Index added 0.02 per cent to 2,124.85 while the Nasdaq-style ChiNext jumped 0.15 per cent to 2182.47.

“It seems that the divergence between the Shanghai and Shenzhen stock markets tells investors they may have the chance to take some profits,” Pang said.

Overnight in the US, the sharp rally in energy stocks drove markets to close higher on Tuesday. The Dow Jones industrial average gained 55 points, or 0.29 per cent, extending its winning streak to seven days. The S&P 500 rose 0.75 per cent, or 16 points, to 2,180.39.

The Nasdaq composite outperformed, rising 1.1 per cent to 5,275.62.

In Asian trading on Wednesday, Tokyo’s Nikkei 225 added 1.10 per cent to 17,862.21, South Korea’s Kospi rose 0.62 per cent, while Sydney’s All Ordinaries was flat at 5,399.60.