Hang Seng Index falls, China stocks rise on mixes expectations about more monetary support to soften blow from coronavirus
- Hang Seng Index ends with weekly loss of 1.8 per cent
- Casino, beer stocks big losers on Friday
Hong Kong stocks fell while China benchmarks rose, as traders split over whether Beijing will do more to shore up the economy pounded by the coronavirus epidemic.
The Hang Seng Index declined 1.1 per cent Friday to 27,308, losing 1.8 per cent over the week, as sentiment weakened that Beijing is taking strong enough steps to boost the economy. Of its 50 constituent members, 47 fell, led by losses in the property sector.
Meanwhile, China stocks advanced.
The Shanghai Composite Index added 0.3 per cent to 3,039. That made for a weekly gain of 4.2 per cent. The Shenzhen Component Index rose 1.1 per cent higher to 11,629, reaching a four-year high.
“Hong Kong investors believe there will be an end of the recent rally if no more fuel injecting [by China], while A-share investors still have a faith that the China government has to ease money to save the economy,” said Alan Li, portfolio manager of Atta Capital.
China’s central bank lowered the February five-year loan prime rate (LPR) by 5 basis points and the one-year LPR by 10 basis points to 4.05 per cent on Thursday. Earlier on Monday, it reduced the one-year medium-term lending facilities (MLF) down to 3.15 per cent from 3.25 per cent.
Both moves were meant to help make it cheaper for private businesses to get loans as they struggle with the shocks of the coronavirus.
The respiratory ailment, which spread from the industrial city of Wuhan in Heibei province, has infected over 76,000 people globally and killed more than 2,000 people, mostly in China. China took the unprecedented step of locking down more than 50 million people to try to contain the contagious respiratory illness.
In Hong Kong, casino stocks were big losers, with Sands China tumbling 3.4 per cent to HK$38.50 before it was to report its earnings after market close.
The gaming sector may not rebound quickly once the coronavirus situation eases, said gaming analyst Noah Hudson at Guotai Junan Securities.
“There’s still a little bit too much optimism,” he said about pent-up demand once the outbreak eases.
Beer companies slipped on expectations of weaker demand due to the coronavirus. China Resources Beer fell 4 per cent to HK$37.95, Tsingtao Brewery declined 2.6 per cent to HK$43.85, while Budweiser Brewing APAC slid 1 per cent to HK$24.60.
Index heavyweight Tencent dropped 2.2 per cent to HK$401, while Alibaba, the e-commerce giant and owner of the South China Morning Post, fell 1.4 per cent to HK$212.60.
The decline of the Hang Seng Index may also spook foreign investors, said Louis Tse Ming-kwong, managing director at VC Asset Management.
“If the HSI falls below the 20-day moving average of 27,340 points, we could be testing the market down to 27,200. That is a bit of a worry, not just to Hong Kong but even worldwide,” Tse said.
“There is a bit more uncertainty in the market as the number of coronavirus cases keeps rising regionally, especially in South Korea and Japan,” Tse added.
Gold-linked stocks were among the day's winners, as the safe haven asset rose to US$1,629.16 an ounce and traded at levels not seen in seven years. Mining company China Gold International Resources rose 5.6 per cent to HK$6.25.
In the Shanghai, Huawei-linked stocks led gains. Around 23 companies related to Huawei recorded a daily cap of 10 per cent increases, including telecommunication device and software company Shenzhen CAU Technology.
Auto companies also rose after Ministry of Commerce said Thursday it is studying policies to stabilise auto sales. The auto index climbed 2.3 per cent with Tianjin Faw Xiali Automobile shot up by the daily 10 per cent limit. DongFeng Automobile jumped 9.2 per cent.
China’s Nasdaq-style ChiNext tech board listed in Shenzhen gained 1.8 per cent to 2226.64 on Friday, with transaction volumes hitting an all-time high of 265.9 billion yuan, according to Wind Information.
“The coronavirus in the short term hasn’t created material damage for tech stocks,” said Longgang Zhou, head of the strategy team of Huachuang Securities.
“Economic growth is weakening, policy easing trend would extend, plus the new rules on refinancing would enhance risk appetite of the market. And in general the tech assets have advantages.”
“Overall market sentiment is rising amid expectation for [further] policy easing, ” he said.
Debutants on Shanghai’s Star Market tech board posted mouth-watering gains.
Thinkon Semiconductor Jinzhou, a semiconductor material producer, skyrocketed 259.8 per cent to 77.96 yuan, while robotic cleaning device company Beijing Roborock Technology surged 84.5 per cent to 500.1 yuan.
