Hong Kong stocks notch slight gain amid concerns over capital outflows

Hong Kong stocks ended slightly higher on Tuesday, up for a second day in a row, but analysts remained cautious about market outlook as the city’s currency fell again to hit the weak end of its peg against the US dollar because of continued capital outflows.

The Hong Kong Monetary Authority, the city’s de facto central bank, stepped into the currency market several times on Monday and Tuesday to defend the Hong Kong dollar. It bought HK$3.93 billion while selling US$500 million in Monday early evening trade, after the Hong Kong dollar hit the 7.8500 per US dollar level, the weak end of its peg. It bought a further HK$2.80 billion during New York trading hours on Monday night and another HK$7.85 billion on Tuesday afternoon.

The Hang Seng Index was up by 0.3 per cent, or 80.35 points, at 28,351.62. The Hang Seng China Enterprises Index, also known as the H-shares index, rose by 0.4 per cent, or 48.46 points, to 11,097.59. The daily turnover decreased slightly to HK$90.5 billion (US$11.53 billion), down 5 per cent from Monday.

Nonetheless, analysts were concerned about the outlook in the short term.

“The Hong Kong dollar has dropped to the weak end of its currency peg again, triggering the city’s monetary authority to intervene in the market and defend the currency,” said Alvin Cheung, associate director at Prudential Brokerage.