Hong Kong stocks thud lower as Tencent tumbles on new online game restrictions; Hang Seng slides 2.43 per cent for the month

PUBLISHED : Friday, 31 August, 2018, 6:31pm
UPDATED : Friday, 31 August, 2018, 6:39pm

Hong Kong stocks ended August trade on a downbeat note on Friday, the final day of trade before the autumn trading season, slipping 2.43 per cent for the month amid concerns of an escalating trade war and an expected hike in US interest rates.

“The recent rally was just a technical rebound, the rebound is over,” said Louis Wong Wai-kit, director of Phillip Capital Management. “The yuan has been down three days in a row versus the US dollar, bringing downward pressure on the stock market.”

China’s yuan has tumbled more than 6 per cent over the past three months, making it the worst performer among currencies in Asia.

The Hang Sang Index ended down 0.98 per cent, or 275.5 points, to 27,888.55. The Hang Seng China Enterprises Index, which tracks Hong Kong-listed Chinese companies, dropped 0.84 per cent, or 92.03 points, to 10,875.58.

On Thursday US President Donald Trump announced plans to move ahead with US$200 billion worth of tariffs on Chinese imports next week, heightening fears of an escalating trade war between the two economic giants.

“Previously there had been hopes that the Sino-US trade tensions may ease, but since the latest developments there is fear that the trade war will continue or even escalate further,” said Wong. “It will certainly hit the export sectors first and then as China’s economy shows signs of slowing down, the trade war will bring about more uncertainty.”

Wong said industries most affected by the trade row would be manufacturing, logistics and shipping.

A further tightening in US interest rates, expected during the Federal Reserve’s September policy meeting, was also weighing on the market, Wong said.

Trump wants tariffs on US$200 billion in Chinese imports ‘as early as next week’

“It is almost a done deal that they will raise interest rates again which will strengthen the US dollar further and may cause fund outflows to accelerate,” said Wong.

Shares of Tencent were dragged lower after China announced plans to curb the number of new online games in an effort to control gaming addiction among children.

The internet giant closed down 4.87 per cent to HK$340, reflecting the most actively traded share by value.

Japanese gaming stocks who depend on the China market also fell on Tokyo’s stock exchange, with Capcom Co down 3.4 per cent and Nexon Co, which gets roughly half of its revenue from China, easing 1.97 per cent.

The technology sector saw the biggest drop among the major sectors, losing 4.6 per cent. Sunny Optical was down 1 per cent to HK$99.75, but smartphone components supplier AAC Technologies rebounded 3.2 per cent to HK$87 becoming the biggest gainser among blue chips

Shanghai’s Fosun Pharmaceutical Group Co was knocked sharply lower after it announced that regulators had carried out an inspection of a Chongqing subsidiary on August 23, sparking concerns among investors sensitive to negative press reports following the nation’s recent vaccine scandal. Fosun Pharmaceutical shares tumbled by as much as 10 per cent in intraday trade, but losses were narrowed later in the session with the share ending 4.8 per cent lower at HK$31.70. The health care sector ended the session 0.5 per cent lower.

Among insurers, China life was down 2.3 per cent to HK$17.74, while Manulife fell 0.95 per cent to HK$145.40, and Ping An dropped 0.85 per cent to HK$75.6. AIA shed 0.2 per cent to HK$67.70.

On the mainland, the Shanghai Composite Index shed 0.46 per cent, or 12.49 points, to 2,725.25. The large-cap CSI300 dropped 0.49 per cent, or 16.59 points, to 3,334.50, and the Shenzhen Component Index was down 1.02 per cent, or 87.33 points, to 8,465.47.

Markets shrugged off a higher-than-expected official Purchasing Managers’ Index (PMI).

The survey, released Friday, showed the non-manufacturing PMI rose to 54.2 in August from an 11-month low of 54.0 in July, while the composite PMI, which covers manufacturing and services, inched up to 53.8 in August, from 53.6 in July. A gauge of China’s manufacturing sector edged up to 51.3 in August, compared to July’s print of 51.2.

“The PMI gave some kind of assurance to the market but not enough, not sufficient enough to lift the market sentiment,” said Wong.