Hong Kong stocks end lower after Trump says he’s ‘not pleased’ with progress on US-China trade talks

Coal miners lead declines as China steps in to cool rising coal prices

PUBLISHED : Wednesday, 23 May, 2018, 6:09pm
UPDATED : Wednesday, 23 May, 2018, 10:13pm

Hong Kong and mainland stocks fell on Wednesday after US President Donald Trump said he was “not pleased” with the progress of US-China trade talks, which had fuelled market optimism in recent days. 

Trump’s comments came during a White House meeting with South Korean President Moon Jae-in on Tuesday, adding that there was a “substantial chance” his upcoming joint summit with North Korean leader Kim Jong-un may not take place next month. 

Trump’s views contradict US Treasury Secretary Steven Mnuchin, who announced over the weekend that the US and China had reached a “trade truce” and that both sides had temporarily agreed to stop threatening tariffs to work on a wider trade agreement. 

“Although the US and China have made a mutual agreement to stop the current trade conflict, from the market side it is not a final deal,” said Gordon Tsui, head of fixed income at Taikang Asset Management. 

“This agreement will have a short-term effect on the market, but the long-term trade relationship is still under negotiation. There is still more work to do to get a balance on the trade deficit,” adding that the market will still fluctuate in the coming few weeks, and the outlook would depend on the prospect of negotiations between the two countries.

The city’s benchmark Hang Seng Index fell 1.82 per cent to reach a five-day low of 30,665.64, led by insurance and the oil and gas sectors, while the Hang Seng China Enterprises Index dropped 2.1 per cent to a five-day low of 12,090.79.

Hong Kong stock exchange reopened on Wednesday after a public holiday to mark the Buddha’s Birthday on Tuesday. 

Coal mining stocks were the big losers after Xinhua News Agency reported that the National Development Reform and Commission, China’s top economic planning body, on Monday ordered miners to step up production and “strive to” lower the price of thermal coal to 570 yuan (US$89) per tonne or less by June 10. 

The onset of early summer in recent weeks has increased the demand for electricity, lifting the price of coal to above 650 yuan from around 580 yuan in late April. 

China Shenhua Energy closed 6.4 per cent lower at HK$19.76 while China Coal Energy shed 6.6 per cent to HK$3.39. The nation’s largest two coal producers have been told by the commission to lead efforts to reduce coal prices, according to the Xinhua report. 

Among the biggest beneficiaries of lower coal prices is Huaneng Power International, the listed flagship of the nation’s largest coal-fired power generator China Huaneng Group, which gained 5.5 per cent to HK$5.8. 

However, an investor relations manager at one of the listed mainland power producers, who declined to be named, said he believes coal prices will only fall gradually, given high seasonal demand and time needed for miners to ramp up production. 

The central government has made lowering power prices one of the government’s objectives for this year, as part of efforts to reduce costs for the manufacturing sector.

On the mainland, the CSI 300 Index – which tracks the big caps listed in Shanghai and Shenzhen – decreased 1.32 per cent to 2,854.58, cancelling out the gains it had made on Monday and Tuesday. The SSE Composite Index also lost 1.41 per cent to 3,168.96, while the Shenzhen Composite Index fell 1.1 per cent to 1,834.71. Meanwhile the Nasdaq-style ChiNext Price Index fell 1.6 per cent to 1,845.97.