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Hong Kong stocks slump ahead of golden week holiday and US presidential debate

Benchmark Hang Seng Index fell 1.56 per cent to 23,317.92 points, the biggest drop in two weeks

PUBLISHED : Monday, 26 September, 2016, 9:15am
UPDATED : Monday, 26 September, 2016, 11:46pm

Hong Kong stocks slumped on Monday as investors held back on trading ahead of mainland China’s golden week holiday and the first presidential debate of the US election campaign.

Without southbound flows to sustain the city’s market during the annual seven-day national holiday, Hong Kong’s stock market was expected to be subdued, said market watchers, whose attention is also focused on the first and most crucial televised debate between Hillary Clinton and Donald Trump.

The benchmark Hang Seng Index fell 1.56 per cent or 368.56 points to 23,317.92 points, the biggest drop in two weeks. The H-share index fell 1.7 per cent or 166.66 points to 9,629.35 points.

The market turnover of the main board in Hong Kong was HK$64.55 billion, the lowest level in four trading days.

All the five most active shares dropped, with mainland internet giant Tencent Holdings leading the loss, down 2.38 per cent to HK$213. HSBC Holdings shed 1.21 per cent to HK$57.35.

Most sectors fell, led by utilities and carmakers, down 1.56 per cent and 1.49 per cent respectively.

Cheung Kong Property Holdings was rumoured to have received a HK$37.3 billion offer for The Center, its grade A office building on 99 Queen’s Road Central. The stock declined 1.23 per cent to end the day at HK$56.40.

“The market support will be taken away without fund flows from the mainland to Hong Kong through the Shanghai-Hong Kong Stock Connect,” said Victor Au, chief operating officer at Delta Asia Financial.

The southbound trading network will close from September 29 to October 10.

Haitong International Securities sales trader Andrew Sullivan echoed this view and said in a note that the markets expected a “weak open” as investors waited to see if southbound investment flows would resume. However, Sullivan expects mainland investors to take a risk-off approach in the days leading up to the golden week.

Au noted that stocks this week would also take cues from US politics ahead of the first presidential debate on Tuesday morning. “The debate is critical for stock markets’ performance. Any poor performance from Democrat Hillary Clinton will put the market under a cloud,” he said.

IG market analyst Angus Nicholson in Melbourne said in a note that a “good” debate performance by Trump could help boost safe-haven assets such as Japanese bonds, currencies, gold prices and German bunds while giving a knock to riskier assets such as high-yield bonds, US equities and emerging-market bonds.

Members of oil cartel Opec were scheduled to hold a meeting on Wednesday to discuss options for cutting or freezing output, which would also influence stock market performance, Au added.

The Shanghai Composite Index fell 1.76 per cent or 53.47 points to 2,980.43 points while the CSI 300 dropped 1.69 per cent or 55.38 points to 3,220.28 points. The Shenzhen Component Index dropped 2.05 per cent to 10,392.7 point while the Shenzhen Composite Index lost 2.07 per cent to 1,966.6 points and the Nasdaq-style ChiNext lost 1.56 per cent to finish at 2,122.9 points.

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