Hong Kong stocks end lower after brief tumble as Chinese bank shares take a hit

Concerns over North Korea and the possible impact of any US action on banks that do business with the reclusive state prompt the fall, but positive economic data helps Shanghai stocks rise for a fourth straight day

PUBLISHED : Wednesday, 06 September, 2017, 9:06am
UPDATED : Wednesday, 06 September, 2017, 7:25pm

Hong Kong stocks ended lower on Wednesday, with the Hang Seng Index briefly tumbling more than 300 points to a two-week low after US stocks had closed sharply lower the previous day, worried by renewed North Korea tensions.

However, mainland Chinese stocks eked out gains to close higher for a fourth straight day, supported by rises in defence and technology shares.

The Hang Seng Index slid as much as 1.2 per cent before paring losses and closing down 0.5 per cent, or 127.59 points, at 27,613.76. The index ended flat on Tuesday following a three-day losing streak.

The Hang Seng China Enterprises Index, known as the H-share index, declined 0.6 per cent to 11,128.77. Daily turnover increased to HK$90 billion from Tuesday’s HK$77 billion.

Caution has been the watchword since North Korea conducted its sixth and most powerful nuclear test over the weekend, prompting investors to move into safe-haven assets such as gold, the Japanese yen and the Swiss franc.

“People want to dump their stocks,” said Louis Tse Ming-kwong, managing director of VC Asset Management.

Concerns have grown that North Korea could launch yet another missile on Saturday, which is North Korea’s national day, he added.

A sharp drop in the US market on Tuesday also added to the selling pressure, with US investors concerned about developments as trading resumed after the Labour Day holiday.

The CBOE VIX Volatility index, known as the fear gauge on Wall Street, soared 21 per cent on Tuesday. The Dow Jones Industrial Average ended down 1.1 per cent at 21,753.31, the S&P 500 fell 0.8 per cent to 2,457.85 and the Nasdaq Composite fell 0.9 per cent to 6,375.57.

Major Chinese banks were a big drag on the Hang Seng Index, as ICBC and China Construction both dropped 1 per cent to HK$5.74 and HK$6.72 respectively, and Bank of China lost 0.7 per cent to HK$4.02.

US President Donald Trump warned recently that the US is considering stopping all trade with any country doing business with North Korea, sparking concerns that China’s big banks could be affected as they might be among the first targets.

In 2016, a UN report said North Korea had used Bank of China to evade sanctions.

Chinese insurers were also among top losers, with PICC Property & Casualty down 2.2 per cent to HK$14.24, and China Life Insurance down 1.4 per cent to HK$24.25.

Hong Kong conglomerate Wharf Holdings tumbled 3.7 per cent to HK$73.85, after Credit Suisse cut its target price for the stock by 5 per cent to HK$73.3.

In the mainland, however, the Shanghai Composite Index ended up by 1.07 point, or less than 0.1 per cent, at 3,385.39, the highest level in 20 months.

The index has risen for four days in a row, helped by positive economic news. On Tuesday, the Caixin China Services Purchasing Managers Index rose to 52.7 in August, the highest reading in three months and indicating an expansion in the sector. Last week, the official non-manufacturing PMI also indicated continued expansion.

The start-up board index ChiNext climbed 0.9 per cent to 1,902.86, the best level in four months.

The Shenzhen Composite Index rose 0.4 per cent to 1,979.53, while the large-cap CSI 300 edged down 0.2 per cent to 3,849.45.

Combined turnover for Shanghai and Shenzhen markets increased 7 per cent to 601 billion yuan from Tuesday.

Defence and technology shares posted gains. Shanghai-listed AECC Aero Science and Tech surged 4.1 per cent to HK$28.33. Shenzhen-traded CITIC Guoan Information Industry rose 1.3 per cent to 11.28 yuan, and Hangzhou Sunrise Technology soared 6.4 per cent to 14.84 yuan.