Tencent boost proves to be short-lived as benchmark Hong Kong index gives up gains

China’s largest mobile game publisher and social network operator is the second-biggest stock on the Hang Seng Index, making up 9.3 per cent in weighting

PUBLISHED : Thursday, 17 May, 2018, 6:29pm
UPDATED : Thursday, 17 May, 2018, 11:10pm

Hong Kong and mainland markets fell on Thursday despite an initial boost provided by Tencent, as investors waited on the sidelines for the outcome of the second round of US-China trade talks in Washington.

The benchmark Hang Seng Index declined 0.5 per cent to 30,942.15 after opening higher at 31,416.71 on the back of Chinese internet giant Tencent Holdings’ 61 per cent jump in first-quarter net profit to 23.29 billion yuan (US$3.65 billion).

Tencent shares closed 3.7 per cent higher at HK$411.00, after rising more than 7 per cent to HK$424.20 in early trading – the biggest intraday rise since August 2015. China’s largest mobile game publisher and social network operator is the second-biggest stock on the Hang Seng Index, making up 9.3 per cent in weighting. 

“Tencent’s better-than-expected result triggered a stock rally this morning which lifted the market, but it fizzled out by noon,” said Louis Tse Ming-kwong, director at VC Brokerage. “After that euphoria, the market had to come back down to reality again.”

The Hang Seng China Enterprises Index lost 1.3 per cent to 12,278.43, dragged down by Chinese carmaker GAC Group, which fell 3.4 per cent to HK$14.10 and Air China, which lost 2.9 per cent to HK$10.14. 

Beijing’s top economic official, Vice-Premier Liu He, is leading a Chinese delegation to the US for renewed trade talks to avert a trade war. Concessions for sanctions-hit Chinese telecoms manufacturer ZTE expected to be high on the agenda. 

Market uncertainty over the next round of US-China trade talks has not been helped by US President Donald Trump sending mixed signals about his stance on ZTE on Twitter in the past few days. 

“Nothing has happened with ZTE except as it pertains to the larger trade deal,” he tweeted on Wednesday, after announcing that he was working with Chinese President Xi Jinping to give ZTE “a way to get back into business, fast”, which resulted in accusations that he was caving in to China’s demands.

The White House banned US firms from selling components to the telecoms giant last month, as part of a raft of trade sanctions on China totalling at least US$60 billion.

Tse said that the market is adopting a “wait-and-see attitude” towards the negotiations. “It could be a give-and-take situation, but of course we don’t know the details. China doesn’t mind giving a little bit more, but it depends what their counterpart can offer.”

Insurance and banking shares fell in the face of uncertainty over prolonged US-China trade talks. China Taiping Insurance fell 3.2 per cent to HK$27.50, while China Everbright Bank decreased 2.2 per cent to HK$4.00 

Mainland indices also closed lower. The CSI 300, which tracks big-caps in Shenzhen and Shanghai, lost 0.7 per cent to 3,864.05, while the Shanghai Composite Index declined 0.5 per cent to 3,154.28. The Shenzhen Composite Index fell 0.5 per cent to 1822.69 and the Nasdaq-style ChiNext lost 0.8 per cent to 1,831.20.