Hong Kong stocks revisit 2-year low as Russia sanctions widen while commodities rally, Rusal sinks 17 per cent

Local equities slid in worst month since November, as sanctions on Russia widened; Aluminium producer Rusal sank 17 per cent as the rouble crashed
Risky assets waned as a flight to safety buoys the US dollar and Treasuries while commodities jumped, stoking inflation concerns

Hong Kong stock market

Cheryl Heng

Published: 10:27am, 28 Feb 2022

Why you can trust SCMP

Stocks in Hong Kong and mainland China slipped as the US and its allies started to sanction Russia over its Ukraine invasion, fanning commodity prices and inflation worries. Rusal sank as the rouble crashed against the dollar.

The Hang Seng Index retreated 0.2 per cent to 22,713.02 at the close of Monday trading, the lowest since the depth of the pandemic in mid-March 2020. The benchmark slumped 6.5 per cent last week. The Tech Index rose 0.1 per cent while the Shanghai Composite Index added 0.3 per cent, both recovering from intraday lows.

Alibaba Group led the retreat among Chinese tech peers, with a 1 per cent loss as analysts continued to trim their price targets after its earnings report last week. Sands China, Geely Auto and Sino Biopharmaceutical all fell by more than 4 per cent, while Hong Kong Exchanges and Clearing tumbled 3.7 per cent.

Companies linked to Russian exports saw their shares sinking. Aluminium producer United Rusal International sank 17 per cent in Hong Kong as the Russian currency crashed more than 30 per cent against the US dollar.

“The sanctions, and the financial turmoil delivered to Russia, will cause a significant impact to global markets in the short term,” analysts at CMB International wrote on Monday. “Energy, agricultural products and safe-haven assets will rally, while stocks will be under pressure.”

Oil surged 3.8 per cent to trade above US$95 per barrel on supply disruption concerns, potentially fomenting an energy crisis and inflation fears. Gold advanced above US$1,900 an ounce, approaching the US$2,063 record set in August 2020.

Traders count on China’s ‘two sessions’ to reverse stock losses as delegates set to endorse growth agenda

The US and the European leaders banned certain Russian lenders from the SWIFT global payment and messaging network over the weekend. Higher commodity prices are seen fanning inflation, choking economic recovery.

03:41

Protests opposing Russian invasion of Ukraine held in cities around the world

The US and its allies also put restrictions on Russia’s central bank reserves to prevent it from undermining the sanctions. President Vladimir Putin, meanwhile, placed its nuclear-armed forces on high alert on Sunday.

“We will hold Russia to account and collectively ensure that this war is a strategic failure for Putin,” the Western leaders wrote. “Even beyond the measures we are announcing today, we are prepared to take further measures to hold Russia to account for its attack on Ukraine.”

04:18

Hong Kong budget earmarks HK$170 billion in fight against Covid-19

The Hang Seng Index weakened 4.8 per cent in February, the worst month since a 7.7 per cent pullback in November. The index gained 1.7 per cent gain in January. China is likely to boost liquidity and stimulus to stabilise the economy, CMB International said.

While Covid-19 outbreaks and geopolitical tensions have weighed on Hong Kong’s markets, it could be an entry point for value stocks, said Linus Yip, chief strategist at First Shanghai Securities.

“There will still be fluctuation in the short term [with the conflict surrounding Ukraine], but the valuation for Hong Kong stocks is so low. It is a good time to accumulate value stocks,” said Yip.

Two firms started trading for the first time in mainland China. Shenzhen Han’s CNC Technology sank 14 per cent, while Shanghai Smart Control surged 44 per cent.

Post