Hong Kong, China markets struggle for direction as four-day winning run ends
- Financials and property developers lead the decline on bleak industry outlook
- Smartphone component suppliers and drug makers shoot up
Hong Kong and China markets struggled for direction and ended lower on Tuesday, one day after recording the biggest rally in about two months, as investors awaited developments on the trade war and US interest rates.
The Hang Seng Index swung between gains and losses, finally ending 0.2 per cent lower at 26,231.54, snapping a four-session winning streak. Turnover on the main board stood at HK$79 billion (US$10 billion), down from Monday’s HK$97 billion.
The Shanghai Composite Index ended 0.1 per cent lower at 2,880.00, after gaining as much as 0.3 per cent in the morning. The Shenzhen Component Index was little changed, while the ChiNext Index of start-ups listed in Shenzhen shed 0.7 per cent.
The decline came despite the US temporarily suspending a ban on American companies doing business with Chinese telecommunication giant Huawei Technologies.
“Even though Huawei suppliers got the extension, there’s not much news on the latest development in the trade talks. So investors are waiting and seeing,” said Stanley Chan, director of research at Emperor Securities.
The market is also eagerly anticipating the release of the Fed’s minutes from its July policy meeting on Wednesday. Its chairman Jerome Powell is set to give a speech during the central bank’s annual retreat on Friday, potentially shedding more light on the global interest rate outlook.
Financials and property developers weighed on the benchmark in Hong Kong, while electronics stocks shot up following the Huawei development.
HSBC Holdings, the largest bank in Europe and Hong Kong, declined 1 per cent to HK$57.4, while insurer AIA Group shed 1.1 per cent to HK$77.4.
The decline was in line with losses in mainland Chinese banks, as Beijing’s latest move to effectively lower interest rates worried investors that banks’ profit margins would shrink.
Property developers also suffered as more banks predicted that real estate prices would drop through next year, amid persistent protest rallies in the city. Sun Hung Kai Properties, Hong Kong's largest developer by capitalisation, fell 2.1 per cent to HK$116.7.
Suppliers of smartphone components to Huawei gained. Sunny Optical Technology was up 4.9 per cent to HK$105.6 and AAC Technologies Holdings finished 3.2 per cent higher at HK$38.5.
Pharmaceutical stocks also advanced broadly, as the battered sector offered fresh hopes for a recovery in valuations after several upbeat first-half results.
CSPC Pharmaceutical Group, a Chinese drug maker based in the northern province of Hebei, climbed 11.1 per cent to close at HK$14.4, after delivering interim earnings that were in line with expectations. China Medical System, which focuses on the promotion and sales of prescription drugs, soared 15.7 per cent to HK$8.92. The company earlier posted a 22 per cent year on year jump in first-half profit.
Shares of drug makers have been hammered since early this year because of China’s push for a centralised bulk procurement programme, which the market feared would set off a price war and drive down profit.
