As it happened: Hong Kong stocks hit 4-month closing low after Fed raises rate; insurers and property shares tumble
Shanghai shares also log the lowest close in more than a month, with financials leading losses
Welcome to SCMP’s China Markets live blog. The Federal Reserve raised its benchmark interest rate on Wednesday by a quarter percentage point, as widely expected, and upgraded its outlook for 2017. However, it surprised investors by signalling plans to raise rates more aggressively in the next year. The rate decision and statement have big implications on global economies and financial markets. We’ll bring you the key levels, price action, and more developments in the region as they happen. Stay tuned.
Here’s a summary of market action so far today:
- Yuan tumbles to the lowest level in eight and half years, triggering fears capital outflows will accelerate
- Chinese government bonds plunge by their daily allowable limit for the first time on record
- Hang Seng Index closes at its lowest level since August 4, down 1.8 per cent
- Shanghai Composite drops to the lowest close since November 2, down 0.7 per cent
- Blue chips fall broadly, with property shares among top losers
- Hong Kong lifts the base rate for the first time in a year, following the Fed
5pm | Julia Hollingsworth
Below is a chart about the daily movements of the Hang Seng Index (yellow) and the Shanghai Composite Index (purple). The percentage at the end of the chart represents the different from the opening, not from previous close. Click to enlarge the chart.
4.20pm | Hong Kong stocks hit 4-month closing low | Julia Hollingsworth
The Hang Seng Index closed at its lowest level since August 4, down 1.77 per cent or 397.22 points to 22,059.40.
The Hang Seng China Enterprises Index slipped 2.34 per cent or 226.99 points to 9,479.16, also the worst closing level in three weeks.
Financials, real estate, consumer cyclicals and energy shares were hit hard.
In particular, insurance and utilities sectors, which are traditionally sensitive to interest rates, dropped 1.7 per cent and 1.6 per cent separately.
“Hong Kong is going to have a really tough time,” said Brett McGonegal, Capital Link Investment Holdings chairman and chief executive.
Hong Kong markets were likely to stay soft for the next four weeks until US President-elect Donald Trump takes office in January, he said.
McGonegal said while the rate increase was “appropriate” for the US, it was not “the right thing”for Hong Kong.
Hong Kong typically follows the US in its monetary policy, as the city’s currency is pegged to the US dollar.
3.50pm | Financials lead losses in Shanghai | Laura He
Financials led losses in mainland stock markets, with China Life Insurance down 5 per cent to 24.1 yuan, New China Life Insurance down 4 per cent to 44.15 yuan, and Ping An Insurance off 3.9 per cent to 35.6 yuan.
China Citic Bank sank 5 per cent to 6.68 yuan, Bank of Communications declined 3.9 per cent to 5.85 yuan, and China Merchants Bank fell 3.1 per cent to 18.24 yuan.
On average, the financial sector notched a 1.3 per cent loss.
3.30pm | Shanghai stocks close lower, while Shenzhen rises | Julia Hollingsworth
The Shanghai Composite deepened earlier losses and ended down 0.7 per cent at 3,117.68, the lowest level since November 2.
The CSI300 Index fell 1.1 per cent to 3,340.43.
However, major indices on the Shenzhen Stock Exchange closed higher. The Shenzhen Composite Index finished 0.7 per cent higher at 1,972.91. The Shenzhen Component Index rose 0.2 per cent to 10,256.11. The Nasdaq-style ChiNext gained 0.7 per cent to 1,975.85.
2.50pm | China Life Insurance slides 4 pc on regulatory curb concerns | Laura He
Hong Kong stocks slid in the afternoon, with China Life Insurance a top loser among blue chips.
The Hang Seng Index fell 2 per cent or 443.89 points to 22,012.73 as of 2.35pm.
China Life Insurance sank 4.2 per cent to HK$20.65, the worst-performing blue-chip stock so far.
The China Insurance Regulatory Commission, the country’s top insurance regulator, has formed a new unit to investigate connected transactions in stock investments by insurance companies, the state-run Shanghai Securities Journal reported Thursday. The move came after the authorities recently launched a crackdown on insurers’ leveraged buying in stock markets.
2.50pm | Sarah Zheng
Below is a chart of the Hang Seng Index. The percentage at the end of the chart represents the different from the opening, not from previous close. Click to enlarge the chart.
1.30pm | HSBC keeps lending rate unchanged | Alun John
HSBC said it will not change either its best lending rate or the savings rate it offers on its Hong Kong Dollar savings deposits. It is the first major bank in Hong Kong to announce its decision. Others are expected to follow with similar decisions.
HSBC’s best lending rate will remain at 5 per cent, while accounts with a balance above HK$5000 will continue to have a savings rate of 0.001 per cent.
The bank said in a statement that the last time it had changed its best lending rate was back in November 2008.
12.54pm | Winning and losing stocks in new world of rising US rates | Laura He
Hong Kong and Chinese stock markets weren’t taken by surprise at the first US interest rate rise in a year on Thursday, but they could face sustained pressure from cash withdrawals in the medium to longer term due to Fed-induced dollar strengthening, analysts said.
12.45pm | China’s government bonds sell off | Cathy Zhang
China’s bond market saw a record sell-off on Thursday, unnerved after the US Federal Reserve foreshadowed three possible interest rate increases in 2017, one more than expected in the market’s consensus.
Benchmark 5-year and 10-year bond futures plunged by their daily allowable limit for the first time on record.
12.40pm | Brace for falling home prices | Peggy Sito and Sandy Li
Hong Kong homebuyers can wave goodbye to negative real interest rates after the US Federal Reserve increased interest rates by 25 basis points, with analysts expecting more increases to come.
The demand for property investments will be hindered after the rate rise, as it will result in “negative carry,” which compel property prices to fall so that the gross rental yield of 2 to 3 per cent can catch up, said Bocom International’s property analyst Alfred Lau.
He expects home prices will fall 30 per cent next year.
12.20pm | Hong Kong stocks fall sharply at midday |
Hong Kong stocks closed the morning session sharply lower. The Hang Seng Index declined 1.7 per cent at 22,076.38. The Hang Seng China Enterprises Index lost 2.4 per cent at 9,469.34.
The Shanghai Composite Index also dropped 0.3 per cent to 3,131.31 by mid-session close. The CSI300 Index fell 0.5 per cent to 3,361.17.
However, Shenzhen indices headed higher. The Shenzhen Composite Index rose 1.1 per cent to 1,982.01. The Shenzhen Component Index gained 0.8 per cent to 10,312.97. The Nasdaq-style ChiNext moved up 1.2 per cent to 1,986.54.
12.05am | Will Chinese buying in Hong Kong property dry up? | Julia Hollingsworth
Francis Cheung, head of China-Hong Kong strategy for CLSA, told reporters at a press conference that the Fed’s rate move would have a big impact on both Hong Kong and the mainland markets.
As Hong Kong’s interest rates are typically in line with the Fed’s, mortgage payments in the city will jump up, while in China, the would drive more capital outflows, he said.
More rate s next year, coupled with higher transaction tax, would see Chinese buying in the Hong Kong property market dry up.
“I believe this will have a significant impact on the Hong Kong property market,” he said.
11.50am | Markets not yet bottomed | Sarah Zheng
“The markets seemed to have not yet bottomed,” Castor Pang Wai-san, head of research at Core Pacific-Yamaichi International (Hong Kong), told the Post, adding that the selling pressure was likely to accelerate in the near-term.
“Liquidity in the market may deteriorate further,” he said.
The interest rate will add pressure to the yuan’s depreciation, affecting companies with heavy investment in China, such as Chinese insurers and banks.
While local banking stocks like Hang Seng Bank and Bank of China Hong Kong are expected to gain from the rate , most of them didn’t perform well this morning because “the (benchmark) index performance is too bad”, he said.
11.35am | Fears deepen over accelerated capital outflows | Enoch Yiu
The US interest rate rise on Wednesday is likely to lead to increased capital outflow from Hong Kong and the mainland, according to analysts.
“With the US interest rates now rising, it’s expected that some of the estimated US$130 billion of capital inflow into Hong Kong since 2008 will be exchanged back to the US dollar,” said the Hong Kong Monetary Authority’s chief executive Norman Chan, during a press conference in Hong Kong today. “A capital outflow from Hong Kong is expected, and the Hong Kong dollar may trade at the weaker end of the peg at HK$7.85 per US dollar.”
Marc Chandler, global head of currency strategy at Brown Brothers Harriman, said the US interest rate rises will mean the greenback will continue to strengthen against the yuan, pushing the Chinese currency to as low as 7.20 yuan/dollar by the end of next year, down 4 per cent from the 6.90 current level.
“Part of the outflow from China, especially the part that reflects the paying down of dollar debt, may continue,” Chandler said.
11.30am | Energy and gold shares suffer | Laura He
Energy and gold mining shares struggled, after the US dollar soared to the highest level in nearly 14 years overnight.
Offshore oil producer Cnooc fell 2.7 per cent. PetroChina dropped 2.5 per cent. Refining giant Sinopec traded 2.4 per cent lower.
China Gold International Resources dived 9.3 per cent, Zhaojin Mining sank 3.6 per cent, and Zijin Mining lost 2.7 per cent.
11.25am | Asia markets to take a hit from a stronger dollar | Laura He
Jingyi Pan, a strategist for IG Group, wrote:
“US bloom, Asia gloom?
Coming full circle, the FOMC has once again lifted interest rates one year after last December’s meeting. The main takeaways from the Wednesday meeting had however been the increase in rate projections and the lack of reference to the incoming administration’s fiscal spending plans.
Compared to the we saw last year, which blew over without ruffling any feather, we certainly see additional pressure for Asian markets today.
The expected US dollar strength comes with divergent impact on Asian markets. USD/JPY shot straight up by 2 big figures from $115.00 level to $117.70 when last checked at 8.45am (Singapore time). Correspondingly, the Nikkei 225 was up by more than 0.8 per cent. This could also in part be attributed to the Bank of Japan’s latest announcement, where the central bank was heard contemplating raising the country’s economic outlook.
Conversely, the rest of the Asian markets will likely experience the pressure of the strong USD today in addition to the weak leads overnight from US and European markets. Nevertheless it may not necessarily be a sustained case of US against Asia with President-elect Donald Trump’s address of trade policies in his first 100 days to shed light on the development of trade between US and the Asia bloc. ”
11.05am | Yuan tumbles to lowest in eight and half years | Cathy Zhang
Chinese yuan tumbled Thursday after the Fed raised the interest rate overnight and made a more hawkish statement than expected by forecasting three rate s in 2017.
The People’s Bank of China slashed the yuan’s reference rate by 261 basis points to 6.9289 per US dollar, refreshing the weakest point since June 2008. Traders are allowed to trade 2 per cent either side of the reference rate.
Onshore yuan traded in Shanghai opened nearly 300 basis points or 0.43 per cent lower at 6.9350 per US dollar, the weakest level in eight years, before rebounding to 6.9346.
Offshore yuan traded in Hong Kong also hit a low of 6.9505 per US dollar earlier in the morning.
10.55am | Hong Kong stocks widen losses | Sarah Zheng
Hong Kong stocks fell further in the morning, dragged lower by property shares.
The Hang Seng Index lost 1.75 per cent, with the property sector down more than 2.6 per cent.
Out of the top 50 most heavily-traded stocks, all but one saw losses.
The Shanghai Composite also dropped 0.38 per cent. The CSI 300 was off 0.58 per cent.
But Shenzhen indices headed higher, as the Shenzhen Component Index rose 0.42 per cent and the Nasdaq-style ChiNext gained 0.60 per cent.
10.50am | Outlook is positive for risky assets | Enoch Yiu
Mark Haefele, Global Chief Investment Officer for UBS Wealth Management, wrote:
“The initial market reaction seems to indicate some market participants found the (Fed) statement slightly more hawkish than expected. This perhaps reflected the small move up in the ‘dot plot’, or Yellen’s comment that fiscal stimulus was ‘not obviously needed’ and that she was not advocating an experiment in a high-pressure economy.
However, we maintain our view that a combination of improving US economic growth and gradually rising inflation provides a positive backdrop for risky assets into the new year. We affirm our global tactical asset allocation positioning.”
10.30am | The effect of Fed’s rate rise on US dollar and crude oil | Laura He
An interesting chart about the effect of Fed’s rate rise on the US dollar and crude oil by @charliebilello.
1) Fed Hike, ECB/BOJ eases, Dollar surge: $20 Crude
2) Fed Holds, ECB/BOJ hold, Dollar down: $60 Crude pic.twitter.com/wXFYJtSolI
— Charlie Bilello, CMT (@charliebilello) November 12, 2015
10.15am | Property shares struggle | Sarah Zheng
Trading at the open was “more muted” than expected, said Andrew Sullivan, managing director of sales and trading at Haitong International, in a report.
Almost all sectors were in the red, with heavyweights Tencent and HSBC down 0.43 per cent and 0.85 per cent respectively.
In particular, property developers suffered broadly, with Cheung Kong Property down 2.23 per cent to HK$50.35, Henderson Land down 1.79 per cent to HK$41.15, and Sun Hung Kai Properties off 2.16 per cent.
10.10am | It may be a bad day ahead for Hong Kong stocks | Sarah Zheng
Hong Kong property developer Whart Holdings sank 3.76 per cent to trade at HK$52.45, the second biggest loser among all blue chips.
“Both US dollar exchange rate and US treasury yield rose obviously, which will be unfavourable to Hong Kong stock market. We expect Hong Kong stocks to suffer selling pressure today,” Ben Kwong Man-bun, a director for KGI, wrote in a note on Thursday morning.
“The Hang Seng Index is expected to trade between 22,100 -22,500 today,” he said.
10.05am | Property leads losers | Laura He
Property stocks were among the worst performers in Hong Kong, with a 2.3 per cent loss on average.
10am | Hong Kong stocks fall further | Laura He
Hong Kong stocks widened opening losses in early trading. The Hang Seng Index declined 1.2 per cent or 268.82 points to 22,187.8. The Hang Seng China Enterprises Index dropped 1.8 per cent or 170.56 points to 9,535.59.
In the meantime, the Shanghai Composite Index fell 0.7 per cent to 3,117.86. The Shenzhen Composite Index dipped 0.1 per cent to 1,962.28.
9.40am | Hong Kong matches Fed move | Enoch Yiu
The Hong Kong Monetary Authority raised the base rate for the first time in a year, following a widely anticipated move by the US Federal Reserve to end almost a decade of cheap capital.
9.35am | Hong Kong, Shanghai stocks open lower | Laura He
Hong Kong’s Hang Seng Index opened down on Thursday by 0.9 per cent or 198.91 points at 22,257.71. The H-shares index fell 1.3 per cent or 122.18 points to 9,583.97.
In the mainland, the Shanghai Composite Index opened 0.5 per cent lower at 3,125.76. The CSI300 Index dropped 0.5 per cent to 3,363.86.
The Shenzhen Composite Index edged down 0.2 per cent to 1,956.34 in early trading. The Shenzhen Component Index traded flat at 10,233.14. However, the Nasdaq-style ChiNext moved up 0.2 per cent to 1,966.17.
On Wednesday, the Hang Seng Index eked out gains to close at 22,456.62, up less than 0.1 per cent. The Shanghai Composite fell 0.5 per cent to end at 3,140.53. The Shenzhen Composite finished 0.8 per cent lower at 1,959.86.