Hong Kong stocks join global tumble on Wall Street turbulence, but sentiment still positive

Mainland Chinese shares gain however, on a positive outlook for banks

PUBLISHED : Monday, 05 February, 2018, 9:13am
UPDATED : Monday, 05 February, 2018, 10:39pm

Hong Kong stocks fell for a third session on Monday, joining major indices across the region in a reaction to a sharp fall in US equities on concerns over a possible acceleration of interest rate rises by the Federal Reserve.

The Hang Seng Index slid 1.1 per cent, or 356.56 points, to close at 32,245.22 after having fallen as much as 2.7 per cent in the session. The Hang Seng China Enterprises Index, or the H-share gauge, fell 0.4 per cent.

Mainland Chinese shares rose, however, with the Shanghai index gaining the most in almost two weeks, the only major index in Asia to advance. Others from Japan and South Korea to Taiwan all tumbled on Monday after a jump in the US 10-year Treasury yield stirred concern that the Federal Reserve will accelerate the pace of raising borrowing costs.

The Treasury yield rose above 2.85 per cent for the first time since January 2014, sending the Dow Jones Industrial Average down by 2.5 per cent.

The positive mood in Hong Kong after the index’s 9 per cent gain so far this year was put to the test by Monday’s tumble, but analysts said there was no need to worry just yet.

“The market sentiment is not that bad given that the market has gone up so much since the beginning of this year,” said Louis Tse Ming-kwong, managing director at VC Asset Management.

“Even 1,000 points isn’t too much of a worry in the short term, but in the medium term investors have to look at the US and what is happening with 10-year bond yields. That could change the complexion of the market.”

The impact will probably be limited in the short term as the Hang Seng Index may decline another 2 per cent from Monday’s close before resuming a run-up, Tse said.

Energy producers were among the biggest decliners. China Petroleum & Chemical, also known as Sinopec, lost 3 per cent to HK$6.76 and PetroChina slid 2.5 per cent to HK$6.17. CNOOC shed 2.2 per cent to HK$12.38.

Property developers dropped on concern the city’s monetary authority would follow the Fed in raising interest rates, due to the peg of the city’s dollar to the US currency. China Evergrande Group lost 2.3 per cent to HK$25.25. Country Garden Holdings fell 2.6 per cent to HK$16.32 and Sun Hung Kai Properties shed 2.3 per cent to HK$130.30.

In the technology sector, Tencent Holdings, the biggest weighting on the Hang Seng Index, sank 1.9 per cent to HK$443.80, but suppliers of technology to smartphone maker Apple recovered on expectations their recent declines had already reflected the US company’s weaker-than-estimated sales of iPhones.

AAC Technologies Holdings climbed 4.3 per cent to HK$147.20 and Sunny Optical Technology added 0.8 per cent to HK$113.

In mainland China, the Shanghai Composite Index gained 0.7 per cent, or 25.42 points, to 3,487.50, the biggest gain since January 23. Banks rose on optimism that earnings for the sector, the cheapest among all industry groups, would rebound as a recovery in China’s growth boosted demand for loans and as their ratios of bad assets fell.

China Everbright Bank jumped 6.6 per cent to 4.99 yuan and Huaxia Bank advanced 5.2 per cent to 10.39 yuan. Bank of Communications added 5 per cent to 7.18 yuan.

Heilan Home, China’s biggest retailer of men’s apparel, surged by the 10 per cent daily limit to 12.58 yuan after a unit of Tencent agreed to buy 238.5 million shares, or a 5.3 per cent stake, in the company for 2.5 billion yuan (US$397.2 million).