Hong Kong stocks slide after entering bull market while Chinese markets gain on upbeat view of economic recovery

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Hong Kong’s market entered bull territory Monday, after being in a bear market for more than three months due to upheaval by the coronavirus. Above, a Star Ferry boat crosses Victoria Harbour in front of a skyline of buildings. Photo: Reuters

Published: 11:11am, 7 Jul 2020Updated: 5:10pm, 25 Oct 2020

Hong Kong stocks slipped on profit taking after Monday’s huge surge that propelled the market into bull territory, while China markets continued their run-up on as traders bet on signs of steady economic recovery.

The Hang Seng Index rose as much as 1.7 per cent on Tuesday, but then reversed sharply into choppy trading for a 1.4 per cent loss. The benchmark had risen a total of 8.4 per cent over the past four sessions, leading the bulls to wrest control from the bears for the first time since late March.

“The Hong Kong market has fully digested the short-term impact from the national security law, and the conversation by Carrie Lam and other officials are within expectations,” said Alan Li, portfolio manager at Atta Capital. “The Hang Seng Index and some stocks overshot too much yesterday, and a technical adjustment is needed.” As long as key opinion influencers in China keep their bullish views, “the [Hong Kong] market is likely to go further in short term.”

Mainland investors continued to snap up Hong Kong stocks, with a net HK$6.1 billion in buying that accounted for a quarter of all market turnover in trading value, according to AA Stocks data. That was down sharply from Monday’s net southbound inflow through the Stock Connect totalling about HK$11.2 billion. On each of the past seven sessions, mainland trades have accounted for more that 20 per cent of market turnover by value.

Hong Kong’s monetary authority stepped in Monday and Tuesday to sell HK$7.17 billion of local dollars to weaken the currency and bring it back within its trading band, as hot money continues to flow into the city, defying speculation of capital flight over the controversial national security law.

Meanwhile, the Shanghai Composite Index trimmed its gains to close ahead by 0.4 per cent, led by consumer staples, health care, and information technology stocks. The advance came after its 5.7 per cent advance Monday – its biggest jump in five years, as bullish sentiment takes firm control. The benchmark has advanced for six straight sessions.