Hong Kong stocks break winning streak over Deutsche concerns, but notch up biggest quarterly gain since 2009

PUBLISHED : Friday, 30 September, 2016, 9:27am
UPDATED : Friday, 30 September, 2016, 10:51pm

Hong Kong stocks slumped to their lowest levels in over two weeks on Friday, breaking a three-day winning streak.

The Hang Seng Index fell 1.86 per cent or 442.32 points to 23,297.15 at the close, the biggest daily drop since September 12 when it plunged 3.36 per cent. The Hang Seng China Enterprises index fell 2.17 per cent or 212.4 points to 9,581.93 on Friday.

Banks were among the worst performers in Hong Kong after concerns over Deutsche Bank rattled stock markets globally.

Deutsche Bank’s share price slipped below the 10 mark for the first time in 30 years after Bloomberg news reported that about 10 hedge funds decided to withdraw some cash and listed derivatives positions from the bank.

Bank of East Asia led the losses among the 50 HSI constituents, diving 4.12 per cent to HK$31.45.

HSBC Holdings, the second most active stock in Hong Kong, dropped 1.72 per cent. Industrial and Commercial Bank of China (ICBC), the world largest bank by assets, slid 2.81 per cent to HK$4.85, while China Construction Bank fell 2.38 per cent to HK$5.75.

Post Savings Bank of China (PSBC) held at HK$4.77, unchanged from Thursday’s close, 1 HK cent above its IPO offering price.

The banking sector concerns contributed to selling pressure on Hong Kong stocks, with turnover climbing to the highest level in a week, reaching HK$70.414 billion even without southbound inflows driving it.

Southbound trading through the Shanghai Hong Kong Stock Connect was suspended September 29 and will remain closed until October 10 as China prepares for the week-long mainland National Day holiday, resulting in subdued sentiment from mainland investors.

Hong Kong stocks will follow overseas markets without China’s liquidity support
Victor Au, Delta Asia Financial

“Hong Kong stocks will follow overseas markets without China’s liquidity support,” said Victor Au, chief operating officer at Delta Asia Financial. US and European markets all traded lower, knocked down by concerns over Deutsche Bank’s financial health.

However, on quarterly basis, Hong Kong’s benchmark Hang Seng index was up 12.04 per cent or 2,502.78 points in the third quarter, recording its best quarterly performance since 2009. The rally was mainly driven by strong money inflows from mainland China,

Au said he is not that pessimistic on Hong Kong stocks in the last quarter of the year, which are expected to gain momentum from Shenzhen Connect, despite potential risks from the mainland property market and US presidential election.

Concerns over China’s housing market continued to circulate following the assertion Wednesday by Dalian Wanda Group chairman Wang Jianlin that the mainland housing market is “the biggest bubble in history”. Mainland Chinese property developers were largely in negative territory on Friday. Soho China was down 4.77 per cent to HK$4.19 while China Resources Land dropped 4 per cent to HK$21.60, while China Overseas fell 1.87 per cent.

Ricky Huang, an analyst for Lukfook Financial, said the overheated China property market will be a big potential risk for the country’s economy. “But the market is greatly driven by the national policies,” he said. “I don’t think the risks will be fully exposed this year.”

Huang also said he expects rising momentum in Hong Kong stocks in the fourth quarter of this year, with Shenzhen Connect a new driver and continuing southbound inflows from Shanghai Connect.

On the mainland, the Shanghai Composite Index rose 0.21 per cent 3,004.70 while the CSI 300 — which tracks companies with high market capitalisation in Shanghai and Shenzhen — increased by 0.27 per cent 3,253.28.

The Shenzhen Composite Index gained 0.49 per cent or 9.69 points to 1,995.61 and the Shenzhen Component index added 0.53 per cent or 55.33 to 10,567.58, while the Nasdaq-style ChiNext jumped 0.17 per cent or 3.72 points to 2,149.90.

The Caixin manufacturing Purchasing Managers’ Index (PMI) for September came in at 50.1, in line with market expectations. This shows that prices will continue to recover, and the positive momentum in activity and inflation data will likely be sustained, HSBC analysts said in a note.

Chart of the day: ChiNext outlook dims