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Hong Kong, mainland stocks end trading slightly up amid US interest rate jitters

Hang Seng Index ended the day up 0.06 per cent ahead of an expected interest rate rise in the United States later this week

PUBLISHED : Tuesday, 13 December, 2016, 9:24am
UPDATED : Tuesday, 13 December, 2016, 10:34pm

Hong Kong stocks slipped on Tuesday before ending slightly up as traders stayed cautious ahead of an expected interest rate rise in the United States.

The Hang Seng Index ended trading up 0.06 per cent, or 13.68 points, at 22,446.70 on Tuesday, while the Hang Seng China Enterprises Index rose 0.21 per cent, or 20.63 points, to 9,719.94.

The market spent much of the day down ahead of expectations the Fed will increase rates by 25 basis points during its two-day December policy board meeting, which is due to wind up on Wednesday. It would be only the second time since the global financial crisis that it has raised rates.

Cao Jiacong, an analyst from China Galaxy International, said the markets had some downside risk with traders now keenly watching for signs of the US Fed’s moves.

Haitong International Securities sales trader Andrew Sullivan agreed, saying: “I would expect continued caution as the FOMC meeting kicks off.” He was referring to the Federal Open Markets Committee, which sets the rate.

Banks, telecommunication companies and property development stocks - which are all sensitive to interest rates - were under pressure on Tuesday.

HSBC dropped 1.08 per cent while a numbed of Chinese banks hit five-day lows, including China Construction Bank, which fell 0.69 per cent, and ICBC, which was down 0.63 per cent.

On Tuesday, Moody’s said Chinese banks would continue to face credit challenges in 2017 due to the tough operating environment brought about by the country’s slower economic growth, among other factors.

Hong Kong local property developers CKH Holdings fell 0.87 per cent to a three-month low, while China Mobile slipped 0.12 per cent, also to its lowest point in three months.

Oil companies were among the biggest gainers, buoyed by rising oil prices.

Petrochina rose 5.30 per cent to a three-month high, while Sinopec Corp was up 0.90 per cent and CNOOC gained 1.57 per cent.

Sinopec’s upwards move was partly down to news that China Life Insurance, the nation’s largest life insurer, had teamed up with SDIC Communications, an infrastructure unit of central government-backed investment firm State Development & Investment Corp, to invest 22.8 billion yuan in one of its gas pipelines. China Life Insurance ended the day up 0.47 per cent.

Crude prices were firm on Tuesday as the first signs of a production cut organised by Opec and other exporters materialised, tightening a market that has been grappling with ballooning oversupply for over two years, according to a Reuters report.

The international benchmark for oil prices, Brent crude futures LCOc1, traded higher at $55.73 a barrel, up nearly 7 cents from their last settlement. Over the weekend, Opec and a number of non-Opec members, notably Russia, agreed to reduce output in a landmark deal.

“The production cut agreement will continue to drive oil prices,” said Cao. “Any corrections should provide an opportunity for bargain hunting.”

Mainland markets saw big slips on Monday, but were mostly up on Tuesday after official data showed the country’s retail sales grew 10.8 per cent year-on-year in November, accelerating from a 10 per cent expansion in October, while fixed-asset investment was up 8.3 per cent in the first 11 months of the year.

The Shanghai Composite Index gained 0.07 per cent to 3,155.04 while the CSI 300 – which tracks large companies listed in Shanghai and Shenzhen – was down 0.12 per cent to 3,405.04.

The Shenzhen Component Index gained 0.29 per cent to 10,332.28 and the Shenzhen Composite index added 0.33 per cent to 1,975.88, while the Nasdaq-style ChiNext moved up 0.03 per cent to 1,985.04.

“November activity data surprised the market on the upside, as the economic recovery gained momentum,” HSBC’s greater China economist Julia Wang said. “Monetary policy should also remain accommodative.”

Sullivan said: “Headline data looks good but we will need to wait to see the detail behind the headline numbers.

“It is likely to mean that the PBOC’s policy remains unchanged and that tightening remains the bias; so we are still slightly value negative on China developers.”

Overnight on Wall Street, the Dow Jones Industrial Average rose 39.58 points, or 0.2 per cent, to 19,796.43. The S&P 500 lost 2.57 points, or 0.1 per cent, to 2,256.96. The Nasdaq Composite lost 31.96 points, or 0.6 per cent, to 5,412.54, with pharmaceutical shares losing the most.

In afternoon Asian trading on Tuesday, Tokyo’s Nikkei 225 added 0.50 per cent to 19,250.52, and Sydney’s All Ordinaries slipped 0.33 per cent.