Hong Kong, China stocks extend decline, clouded by fears of US-China trade war

Markets in Hong Kong and China have ignored lull in trade spat; stocks continued to fall to close lower on Thursday

PUBLISHED : Thursday, 21 June, 2018, 6:50pm
UPDATED : Friday, 22 June, 2018, 3:49pm

Hong Kong and mainland Chinese markets suffered more losses on Thursday as a lull in the US-China trade tussle failed to stave off investors’ lingering concerns of an outright trade war.

The Hang Seng Index, Hong Kong’s benchmark, fell 1.35 per cent, or 400.12 points, to close at 29,296.05, wiping out Wednesday’s small gains after a four-day losing streak. The Hang Seng China Enterprises Index also decreased 1.23 per cent, or 141.08 points, to 11,364.66.

“Global stocks were pressurised by the Asian markets, as most indices were down more than 1 per cent due to worries about the trade war and the slowdown of China’s economy leading to a possible credit crunch, as evidenced by recent data,” said Louis Wong, dealings director at Philip Securities Hong Kong. Chinese government figures showed slowing retail and property sales growth in April.

“Yesterday’s rebound was very short-lived, but due to lingering investor concerns over the trade war, I see no sustainable rebound in the short term.”

Among blue-chip stocks, shares in lens manufacturer Sunny Optical Technology Group tumbled nearly 9 per cent to HK$143, while China’s largest state oil and gas producer CNOOC fell 3.3 per cent to HK$12.44.

Geely Auto shares declined 2.5 per cent to HK$21.50, while Tencent Holdings lost 0.9 per cent to HK$396.80. HSBC shares fell 1 per cent to HK$74.40.

ZTE shares also lost 1 per cent to HK$11.70, after posting a small gain on Wednesday. The stock has fallen by 54 per cent since mid-April.

Bucking the trend, Chinese oil and gas producer United Energy Group rose 7. 3 per cent to 88 HK cents ahead of Chinese President Xi Jinping’s planned visit to Pakistan on Monday, where the company has a significant base for oil exploration. Shares in insurance giant Prudential also increased 0.7 per cent to HK$189.90.

Mainland Chinese shares fared similarly negatively across the board. The CSI 300, which tracks blue-chip stocks listed in Shanghai and Shenzhen, declined by 1.17 per cent, or 42.47 points, to 3,592.97, while the Shanghai Composite Index lost 1.37 per cent, or 39.92 points, to 2,875.81.

The Shenzhen Composite Index fell by 2.13 per cent, or 34.27 points, to 1,578.33 and the Nasdaq-style ChiNext Price Index retreated 2.69 per cent, or 42.11 points, to 1,521.68.

Yesterday’s rebound was very short-lived, but due to lingering investor concerns over the trade war, I see no sustainable rebound in the short term
Louis Wong, Philip Securities Hong Kong

The downturn in Chinese markets comes as the Chinese yuan fell for a sixth straight session against the US dollar on Thursday, sliding to 6.5088 yuan per dollar – close to this year’s low point of 6.5449 set on January 10. The decline has wiped out almost all of the currency’s gains against the dollar this year, sparking rumours that the Chinese government may intervene to stabilise the yuan.

“The worry of a trade war is to blame for the drop of the yuan. The US has threatened to impose the tariffs on Chinese exports, which has led to worries about the outlook of the yuan,” said Ben Kwong Man-bun, director of KGI Asia.

“However, the PBOC (People’s Bank of China) would not allow the yuan to drop substantially against the US dollar … The PBOC is likely to introduce some measures or verbally support the yuan to prevent further devaluation.”

Elsewhere, stocks crept higher in the absence of new threat of sanctions from US President Donald Trump. Japan’s Nikkei 225 Index was up 0.61 per cent to end at 22,693.04, Australia’s All Ordinaries Index added 0.93 per cent to 6,332.86, but South Korea’s Kospi lost 1.1 per cent to 2,337.83.

US stocks closed mostly flat on Wednesday. The blue chip gauge – the Dow Jones Industrial Average – slid 0.17 per cent, while the S&P 500 gained 0.17 per cent and the Nasdaq gained 0.72 per cent, helped by tech stocks.