Hong Kong stocks end month in red amid US-China tensions despite signs of China economic recovery
- Hang Seng Index gained 0.8 per cent on Wednesday after rising as much as 2.2 per cent; index dropped for first monthly loss since May
- China Evergrande soared 19.4 per cent after unveiling steps to pre-empt a 130 billion yuan cash crunch in the first quarter next year
Hong Kong markets gained on Wednesday but reported its first monthly decline since May, as deteriorating US-China relations ahead of the US presidential elections roiled the markets despite signs of economy recovery from China.
The Hang Seng Index ended trading on Wednesday with a 0.8 per cent gain to 23,459.05, paring an earlier 2.2 per cent rally in early trading. The benchmark completed the month with a 6.8 per cent drop, bringing the loss this year to 17.2 per cent.
Heightened US-China tensions have roiled the markets over the past month, as the Trump administration moved to impose restrictions on Chinese semiconductor producer SMIC and threatened bans on popular Chinese apps TikTok and WeChat.
SMIC gained 2.4 per cent on Wednesday, trimming the decline this month to 27.2 per cent. Benchmark heavyweight Tencent, the owner of WeChat, gained 1.2 per cent to HK$511.50, unable to reverse a 3.6 per cent loss in September.
“US-China relations still remain under very intense conditions,” said Louis Tse Ming-kwong, managing director of VC Asset Management. He advised extra caution going forward as the US presidential elections neared, and that investors should expect volatility in the markets, particularly in tech stocks priced at high levels.
Markets in Hong Kong will be closed for the rest of the week for the National Day and Mid-Autumn Festival holidays. While Hong Kong will resume trading on Monday, markets in China will reopen on October 9.
The official non-manufacturing PMI, which measures sentiment in the services and construction sectors, stood at 55.9 in September, above the reading of 55.2 for August and median expectations by Bloomberg of a decline to 54.7.
“The strong recovery in the second quarter relieves pressure on credit easing, and China’s monetary policy has shifted from large-scale liquidity injection to more targeted instruments,” said Xiao Chunxu, economist at Moody’s Analytics in a note.
“Loan support and further repayment extensions to small and medium-sized enterprises help firms stay afloat in the crisis but raise default risk when the grace period ends,” said Xiao.
China’s economic recovery “has picked up pace with supply and both domestic as well as overseas demand improving,” said Stephen Innes, chief global markets strategist at AxiCorp. “In the near future, however, great uncertainties remain about the overseas pandemic and the US election.”
“The extent to which the debate matters for markets is whether ‘undecideds’ are swayed either way. Polls in the comings days could provide more colour on any movement,” said Innes.
Global funds flee China’s stock market at the fastest quarterly pace in 15 months after making outsize profits for their portfolio
The stock is still down 8.8 per cent for the year, over concerns about its debt load.
Other property developers also rose, with Chinese Resources Land leading gains on the Hang Seng Index with a 5.9 per cent increase. New World Development rose 1.8 per cent, while Henderson Land added 2.5 per cent.
Li’s right-hand man, Calvin Tai, will take his place on an interim basis from January 1, while the search continues for a permanent replacement.
The CSI300 index that tracks performances on both the Shanghai and Shenzhen markets gained as much as 0.9 per cent before ending the day with a tiny loss of 0.1 per cent to 4,587.40. It posted a monthly loss of 4.8 per cent, and is up 12 per cent for the year.
Chinese traders have taken their money out of the markets to enjoy the long holiday, said VC Asset’s Tse.
