Tencent, currency woes drag Hong Kong stocks to 11-month low

PUBLISHED : Wednesday, 15 August, 2018, 8:05pm
UPDATED : Wednesday, 15 August, 2018, 8:05pm

Hong Kong’s benchmark index dropped for the fourth day in a row to a 11-month low, weighed down by heavyweight Tencent Holdings and currency woes. Chinese stocks too extended losses on Wednesday.

The fall came as offshore yuan hit a 20-month low and the Hong Kong dollar weakened to the low end of the peg, which forced the Hong Kong Monetary Authority to intervene in the foreign exchange market on Wednesday.

The Hang Seng Index closed at 27,323.59, down 429.34 points or 1.6 per cent. The losing streak that started last Friday after the Turkish lira crisis roiled global markets, has dragged the index to its lowest level since last September.

In China, the Shanghai Composite Index lost 57 points, or 2 per cent, to end at 2,723.26, while the Shenzhen Composite Index fell 2.1 per cent, or 32.08 points, to 1,481.82.

The blue-chip CSI 300 index fell 2.4 per cent, or 80.94 points, to end at 3,291.98.

“As the Hong Kong dollar and yuan have weakened against the US dollar in recent days, investors sold yuan assets and Hong Kong listed companies to escape the currency devaluation loss, leading to capital outflow. This is bad news for the stock markets,” said Louis Tse Ming-kwong, managing director at VC Asset Management.

He said HKMA’s buying of the Hong Kong dollar meant that Hong Kong’s aggregate balance, which is an indicator of liquidity in the banking industry, has dropped to HK$104.9 billion.

“When it drops below the HK$100 billion threshold, it may signal an increase in interest rates in Hong Kong. If it happens, it would hurt the stock market and property market sentiment,” said Tse.

Tencent fell 3.6 per cent, for a fourth straight day, to HK$336 ahead of the company’s results announcement. Market observers were pessimistic about the Chinese internet giant’s earnings from mobile games in the second quarter.

Tencent, which announced results after the market close, reported a decline of 19 per cent to 17.6 billion yuan from the prior quarter in its mobile-game business, as it failed to get approval to charge fees for popular tactical tournament games and new game releases were delayed.

Net income fell to 17.9 billion yuan (US$2.6 billion) in the quarter ended June 30, compared with 19.3 billion yuan average of 12 analyst estimates compiled by Bloomberg.

Other heavyweights such as HSBC, AIA and China Construction Bank also fell more than 1 per cent.

The Hang Seng China Enterprise Index fell 2 per cent, or 209.17 points, to 10,535.14.

WH Group defied the market’s falling trend, rising 8.2 per cent, to close at HK$6.57 after reporting a profit that was stronger than expected on Tuesday.