Daily Report

Hong Kong stocks gain little as Bank of Japan upsets market, offsetting US Fed’s decision to hold rates

Hang Seng gains, mainland markets close midday trading with small losses

PUBLISHED : Thursday, 28 April, 2016, 9:05am
UPDATED : Thursday, 28 April, 2016, 5:41pm

Hong Kong stocks retreated from a morning rally to end almost flat on Thursday as the Bank of Japan (BoJ) upset the market by keeping its monetary policy unchanged, offsetting the positive effect of US Federal Reserve’s decision to put off an interest rate rise yet again.

The Hang Seng Index gained 26.4 points, or 0.12 per cent, to close at 21,388.03 after advancing over 100 points in the morning session, as the BoJ brushed aside market calls for more stimulus measures. The Hang Seng China Enterprise Index ended up 23.5 points, or 0.26 per cent, to 9,060.93.

Construction, semiconductors and coal stocks gained, while shares of insurance and basic materials sectors dropped.

Fast Retailing, the parent of Uniqlo, saw its stock fall 3 per cent to HK$20.8 as the yen jumped after the BoJ announcement. Shares of CEC International, a Hong Kong operator of Japanese snack chain 759 Store, dropped 2.9 per cent to HK$1.02.

“Today’s BoJ announcement was underwhelming and the swing in the vote by 8-1 not to increase the size of the monetary base will likely be seen as a huge disappointment…Economic data looks set to disappoint,” Jefferies said in a note.

Kingston Lin, security brokerage director at AMTD, said Hong Kong stocks took cues from the collective fall of its Asian peers like Japan and Korea in the afternoon. But as there was “neither specific bad news nor good news”, the benchmark could hold between 20,000 and 21,600 in the short term.

“The next focus is whether the launch date of the Shenzhen-Hong Kong Stock Connect is announced in May,” Lin said.

China’s yuan-denominated A-share market also slid to hit the lowest level so far this month. The Shanghai Composite Index fell 0.27 per cent, or 8.08 points, to 2,945.59. The CSI 300 Index tracking blue chips in Shanghai and Shenzhen slipped 0.17 per cent, or 5.33 points, to 3,160.58.

The Shenzhen Composite Index edged down 2.2 points, or 0.12 per cent, to 1,874.31. The Nasdaq-style ChiNext Index inched up 0.4 per cent, or 8.62 points, to 2,155.23.

“The A-share market is hardly affected by outside factors…the main problem is lack of capital,” Lin said.

The People’s Bank of China injected 110 billion yuan (HK$131.7 billion) of liquidity through open market operations on Thursday, but as there are 260 billion yuan of reverse repo due, a net of 150 billion yuan was drawn.

Speculative money continued to enter the commodity futures market although Chinese bourses have launched a series of measures to cool down the frenzy, analysts said.

Trading turnover in Shanghai and Shenzhen flatlined at a lowly 431.4 billion yuan.

Airlines, securities and steel sectors led the losers, while coal and transportation stocks gained.

Overnight, the US Fed decided to keep interest rates unchanged but said the labour market was improving.

“An important caveat was the first time addition of ‘global economic and financial developments’ in the list of ‘closely monitored’ data. This indicates that external conditions may play a bigger than normal role in the Fed’s decision making,” CMS HK said in a note.

The brokerage said the possibility of a June rate rise has now largely receded as the Fed’s meeting comes just a week before the Brexit referendum, and that it has pushed back the expectations of a rate rise to the July-September period.

Additional reporting by Xie Yu