Hong Kong stocks ease as yuan hits 7-month lows, jitters persist about policy support
- SOE stocks bucked the trend and rose after Wednesday’s inflows from state-run funds, including China Reform Holding
Hong Kong stocks fell as the yuan’s seven-month-lows and China’s decision to hold lending rates added to concerns of investors already jittery about policy support from Beijing.
The Hang Seng Index dipped 0.5 per cent to 18,335.32 at close on Thursday, taking a breather after it posted its biggest daily gain in three months on Wednesday when it rose 2.9 per cent. The Tech Index tumbled 1.7 per cent while the Shanghai Composite Index edged down 0.4 per cent.
Losses on stocks intensified as the yuan weakened below 7.12 per US dollar, a level not seen since November, after the People’s Bank of China lowered the daily reference rate on Thursday. The currency pressure also left the benchmark lending rates unchanged, according the central bank announcement on the same day.
“The renminbi has been under considerable pressure recently and rate cuts would be a further drag on the currency,” said Leah Fahy, assistant economist of Capital Economics.
The one-year loan prime rate (LPR), which most new and outstanding loans in China use, was kept at 3.45 per cent, while the five-year LPR, a benchmark for mortgages, stayed at 3.95 per cent. These are widely expected after the country’s central bank held its one-year medium-term lending facility earlier in the week.
“While a potential move to lower the LPR’s today were only an outside chance, the market lost some of its buying enthusiasm on news that the key lending rates are staying put for the time being,” said Tim Waterer, chief market analyst at KCM Trade.
