Hong Kong market flat after three week rally on US rate rise fears

PUBLISHED : Tuesday, 23 August, 2016, 9:27am
UPDATED : Tuesday, 23 August, 2016, 10:55pm

Hong Kong stocks closed flat on Tuesday, with all major indexes trading within a narrow range as market watchers waited for indications later in the week from Federal Reserve chairwoman Janet Yellen on US interest rate movements.

The Hang Seng Index closed 1 point higher to close at 22,998.93, while the Hang Seng China Enterprises index lost 0.16 per cent or 15.66 points to 9,586.99.

“Everybody in the market has one eye on the Jackson Hole meeting in the US later this week and whether Yellen will give any hints on possible interest rate rises,” said Louis Tse Ming-kwong, director of VC Brokerage.“This has led the markets to remain flat.”

Ben Kwong Man-bun, executive director of KGI Asia, echoed that view, saying that investors are waiting for Yellen’s comments for some clarity this week and are therefore cautious on trading.

Hawkish comments from Fed Vice Chairman Stanley Fischer and New York Fed President William Dudley increased expectations of a rate increase, which is seen as negative for Hong Kong’s stock market, added Kwong.

However, Tse said market sentiment in the city is unlikely to weaken.

“Even if Yellen confirms an interest rate rise, it is expected the US might only make one increase [this year], and that might not be too high.

“In addition, Hong Kong corporate interim earnings so far have not been bad, which also supports the market,” Tse said.

A number of blue chips announced interim results on Tuesday. China Telecom said at the lunch break that its interim net profit had risen 6.3 per cent year on year to 11.67 billion yuan for the first six months, but its share price slumped 3.34 per cent to HK$4.05.

China Foods added 0.33 per cent to close Tuesday at HK$3.05 after it announced a 17.7 per cent year on year profit increase in the first six months after adjustment, while Want Want China rose 0.2 per cent after it reported a slight profit rise of 0.4 per cent in the first half.

The market is overbought after a three-week rally
Ben Kwong Man-bun, KGI Asia

Kwong from KGI is not optimistic on the outlook for Hong Kong stocks, saying that with most good news already digested a market correction is likely. “The market is overbought after a three-week rally,” he said. “The city’s benchmark remains at a high level, mainly supported by some index weighted stocks, but you can notice that more and more stocks are starting to drop.”

In Hong Kong, the worst performers were jewellery and watch retailers, which were down 1.37 per cent on average while the automobile sector was down 1.14 per cent, followed by utilities, which lost 0.71 per cent.

Industrial and Commercial Bank of China, the world biggest bank by assets, was the most heavily traded stock, up 0.81 per cent to HK$5. ICBC Asia, the overseas banking business of ICBC, denied a report from Chinese language newspaper Ming Pao that claimed ICBC Asia would buy a 75 per cent stake in its The Centre development in Central for HK$34.8 billion.

“ICBC Asia has never been in negotiation to buy The Centre. We did not buy the property,” an ICBC spokeswoman told the Post.

Among the most heavily traded stocks in Hong Kong, CK Property rose 0.72 per cent to close Tuesday at HK$55.90.

CRRC Times Electric was down 8.86 per cent to finish the day at HK$40.10. The largest railway equipment provider in China reported first half profit growth of 5 per cent to 1.29 billion yuan on Monday, which was below expectations.

Rival railway giant CRRC was also down 4.15 per cent to HK$6.93 after it reported a lower-than-expected profit growth of 2 per cent to 4.79 billion yuan.

China Vanke, the country’s largest housebuilder in the midst of a shareholder battle for control of the business, fell for a second day running, losing 2.43 per cent to HK$20.10.

In China, the markets closed slightly higher on Tuesday. The Shanghai Composite Index closed 0.16 per cent up to 3,089.70 while the CSI 300 — which tracks the large caps listed in Shanghai and Shenzhen — was up 0.15 per cent to 3,341.83.

The Shenzhen Composite Index added 0.27 per cent to 2,024.05, the Shenzhen Component Index was up 0.18 per cent to 10,750.29, while the Nasdaq style ChiNext advanced 0.31 per cent to 2,174.16.