Hang Seng Index

Hong Kong, mainland China stocks tumble after Fed meeting prompts capital outflow worries

  • Fed meeting fuels expectations of a rate rise in December
  • Banking stocks take hit after Chinese financial regulator makes private lending targets
PUBLISHED : Friday, 09 November, 2018, 11:33am
UPDATED : Friday, 09 November, 2018, 10:42pm

Hong Kong stocks tumbled the most in more than two weeks on Friday, after a US Federal Reserve meeting signalling a gradual rate rise prompted worries about capital flow out of China.

The benchmark Hang Seng Index tumbled 2.4 per cent, or 625.8 points, to 25,601.92, the largest daily loss since October 23. The gauge declined 3.3 per cent for the week – the worst performance in a month.

The Hang Seng China Enterprises Index declined 2.1 per cent, or 224.75 points, to 10,478.84.

Meanwhile, stocks also trended lower in Shanghai and Shenzhen, recording a five-day losing streak. The Shanghai Composite Index fell 1.4 per cent to 2,598.97, and the Shenzhen Composite Index shed 0.4 per cent to 1,328.19.

The US policymaking Federal Open Market Committee left interest rates unchanged at between 2 per cent to 2.25 per cent on Thursday, fuelling expectations it would approve the fourth rate rise of this year in December.

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“The market is worried that capital will flow out of China, because the expected rate hike is likely to further weaken the Chinese yuan,” said Kingston Lin King-ham, director of securities brokerage AMTD.

Capital outflow pressures are starting to pile up as China’s forex reserves fell for the fourth straight month to hit a 18-month low in October, according to data released on Wednesday, driven by an ongoing trade war.

“We expect that the US Fed will continue with its progressive rate hike path, which will put emerging markets under currency depreciation and capital outflow pressure,” the Hong Kong Monetary Authority, the city’s de facto central bank, said in a statement.

Financial stocks led the decline in both mainland Chinese and Hong Kong markets, after China’s financial regulator outlined targets for banks to increase lending to private companies.

Private lending will need to make up at least half of the new corporate loans across banks in three years, Guo Shuqing, chief of the China Banking and Insurance Regulatory Commission, said on Thursday.

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Concerns over potentially increasing credit risks and bad loans sent the bank stocks lower. China Merchants Bank plummeted 5.5 per cent to HK$31.75, and the Industrial and Commercial Bank of China dropped 2.7 per cent to HK$5.34.

Energy shares also fell broadly as oil prices slipped into the bear territory on Friday, having plunged more than a fifth since early October on rising supply.

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State-owned energy giant China National Offshore Oil Corporation (CNOOC) plunged 4.4 per cent to HK$13.54, and PetroChina was down 1.7 per cent to HK$8.09.

In Hong Kong, index heavyweight Tencent Holdings tumbled 4.9 per cent to HK$279.2, in the wake of recent reports suggesting that the gaming giant is slashing its marketing budget for its gaming division as Chinese regulators have stopped approving new games.

Apple suppliers also plummeted, after the Nikkei Asian Review reported that the smartphone maker halted plans for additional production lines dedicated to the new iPhone XR model because of disappointing demand.

AAC Technologies Holdings, which supplies acoustic components to iPhone, fell 4.1 per cent to HK$53.55. Sunny Optical Technology, a supplier of camera modules and lenses, declined 4.2 per cent to HK$70.2.