Hong Kong stocks end session lower, but up on the week
Hang Seng Index sheds 0.8 per cent during Friday’s session as S&P’s credit rating downgrade on Hong Kong and China weighs on sentiment
Hong Kong stocks dropped on Friday led by financials and property after S&P Global Ratings downgraded Hong Kong and China’s credit ratings in two separate moves.
The Hang Seng Index fell 0.8 per cent or 229.80 points to 27,880.53, paring this week’s gain to 0.3 per cent, while the Hang Seng China Enterprises Index lost 0.8 per cent to 11,109.00.
S&P Global Ratings lowered Hong Kong’s long-term issuer credit rating to AA+ from AAA on Friday morning, hours after it downgraded China’s sovereign credit rating to A+ from AA-, citing “very strong institutional and political linkages” between China and Hong Kong.
Late Thursday, the rating agency said in a separate statement that the China downgrade reflected its views that “a prolonged period of strong credit growth has increased China’s economic and financial risks”.
Capital inflows to the Asia region are expected to continue however and today’s market drop was merely a knee-jerk reaction to S&P’s rating downgrade, analysts said.
“Hong Kong’s link with China is increasing so China’s rating change affecting Hong Kong is inevitable,” said Freeman Tsang, head of China and Hong Kong of Legg Mason. “But overall this is going to be a short term factor to investors only unless there is a real sharp decline in our foreign exchange reserves, and overall balance sheet."
In line with the sovereign downgrade, S&P cut ratings for the China units of three foreign banks, including HSBC, Hang Seng Bank, and DBS Bank.
In response to the cut, HSBC was one of the constituents that dragged down the most on the Hang Seng Index, falling 0.6 per cent to HK$76.20 and contributing to a 17 point loss.
Other financials also fell, with China Construction Bank losing 0.8 per cent to HK$6.62, Ping An Insurance dropping 1.6 per cent to HK$61.60 and China Life Insurance down 0.8 per cent to HK$23.65.
China Merchants Port plunged 4.4 per cent to HK$23.0, being the weakest blue-chips
Real estate developer China Resources Land slid 3.9 per cent to HK$25.65 and Sun Hung Kai Properties declined 1.1 per cent to HK$130.4.
However New World Development bucked declines, gaining 1.6 per cent to HK$11.22 as Citigroup raised the target price to HK$15 and chose it as the industry top pick. Wharf Group in line also increased 1.0 per cent to HK$8.05.
Automobiles also retreated. Geely auto fell 3.5 per cent to HK$23.35, BYD fell 1.5 per cent to HK$70.6
China Unicom fell 1.2 per cent to HK$11,4 and China Mobile dropped 0.9 per cent to HK$79.4. However China Mobile CEO Li Yue said 5G represented the new age of Internet of Everything and the group’s top strategy is to solve the connection problem. He said by 2020, the group’s connection scale will surge to $1.75 billion from $880 million from 2015.
On the mainland, the Shanghai Composite Index edged down 0.2 per cent to 3,352.53 and the large-cap CSI300 slipped 0.09 points to 3,837.73.
The Shenzhen Composite Index and the ChiNext Price Index dropped 0.3 per cent and 0.4 per cent separately to 1,988.59 and 1,866.42.