Hong Kong stocks slammed for 400-point loss, Ping An leads insurance companies down for a second day 

Analysts say negative sentiments stemmed from expectations that a US-China breakthrough deal was unlikely

PUBLISHED : Thursday, 03 May, 2018, 9:16am
UPDATED : Thursday, 03 May, 2018, 10:52pm

Hong Kong stocks thudded lower on Thursday, finishing with a more than 400-point loss on concerns that the ongoing US-China trade negotiations in Beijing are unlikely to yield a breakthrough deal. Insurers led the decline, chalking up losses for a second day.

The Hang Seng Index lost 1.34 per cent, or 410.51 points, to 30,313.37, while the Hang Seng China Enterprises Index lost 1.43 per cent, or 174.73 points, to 12,018.86.

Analysts said the mood was sluggish as Thursday’s arrival of the US delegation in Beijing for trade talks fuelled concerns that a breakthrough deal was unlikely. State media reported that China would stand up to US bullying if it necessary, even though it was better to work things out at the negotiating table.

“The US negotiation team is largely made up of hawks, so it’s difficult for them to compromise and I believe it will take a very long time to settle the trade dispute,” said Louis Tse Ming-kwong, director of VC Brokerage, adding that the prevailing negative sentiment in the market would stick for a while.

Hong Kong stocks are also facing headwinds on expectations of higher interest rates because of the tightened monetary policy and the upcoming IPO of Chinese internet giant Xiaomi, which could lock up a sizeable amount of capital, in turn draining liquidity and boosting Hong Kong interest rates in June or early July.

The US negotiation team is largely made up of hawks, so it’s difficult for them to compromise and I believe it will take a very long time to settle the trade dispute
Louis Tse, VC Brokerage

The Chinese smartphone maker will list shares in Hong Kong later this year, seeking to raise US$10 billion in what could be the world’s biggest IPO of 2018.

On Wednesday, the US Federal Reserve kept interest rates unchanged as widely expected. The Fed’s comments of a “gradual” pace of normalisation meant that it was on track for one 25 basis point rate hike per quarter, picking up from a slower pace of one hike per year in 2015 and 2016, DBS Bank said in a research note.

The insurance and coal sectors led markets lower in Hong Kong. Ping An Insurance (Group) shed 1.37 per cent to HK$75.65 and AIA Group continued its losses for a second day, declining 0.5 per cent to HK$69.35.

Banks also did not fare well, with China Construction Bank Corp losing 1.82 per cent to HK$8.08 and HSBC shedding 0.96 per cent to HK$77.70. Tencent Holdings, the stock with the largest turnover in the Hang Seng Index, slid 2.14 per cent to HK$385.

Mainland markets reversed the day’s earlier losses to close higher. The Shanghai Composite Index rose 0.64 per cent, or 19.68 points, to 3,100.86, while the CSI 300, which tracks big-caps listed in Shanghai and Shenzhen, gained 0.78 per cent, or 29.35 points, to 3,793. The Shenzhen Component Index advanced 1.12 per cent, or 115.77 points, to 10,458.62, while the Nasdaq-style ChiNext Price Index was higher by 1.40 per cent, or 25.22 points, to 1,826.79.