Hong Kong stocks close down on concerns over weak Chinese bank results

Hang Seng Index fell 0.77 per cent to 22,820.78 at Wednesday’s close, while the Hang Seng China Enterprises index dropped 0.83 per cent to 9,507.09

PUBLISHED : Wednesday, 24 August, 2016, 9:36am
UPDATED : Wednesday, 24 August, 2016, 8:31pm

Hong Kong stocks closed lower on Wednesday amid increasing concerns over weak earnings from Chinese finance companies, most of which will release results next week.

The Hang Seng Index was down 0.77 per cent or 178.15 points at 22,820.78 at Wednesday’s close, while the Hang Seng China Enterprises index fell 0.83 per cent or 79.9 points to 9,507.09.

All the top five active shares in Hong Kong traded lower, with market turnover slumping to its second- lowest level in two weeks at HK$61.96 billion, slightly higher than Tuesday HK$60.76 billion.

Industrial and Commercial Bank of China(ICBC), the world largest bank by assets, which will report half-year results next Tuesday, led the losses on Wednesday, down 2 per cent to HK$4.9.

Bank of China, which releases its results the same day as ICBC, followed with a 1.73 per cent decline to HK$3.14.

Agricultural Bank of China and China Construction Bank closed down 0.63 per cent and 0.86 per cent respectively ahead of their performance reports in the coming two days.

The insurance sector was also among the biggest losers on Wednesday, down 0.71 per cent on average as a group. China Life insurance and PICC Property & Casualty dropped 0.76 per cent and 2.5 per cent respectively ahead of their result announcements.

Alex Wong Kwok-ying, asset management director at Ample Capital, said the biggest concern for Hong Kong stocks is the profit decline risk of the Chinese financial sector.

“The fundamentals of the Chinese financial industry have not be improved,” said Wong. “The regulation tightening risks are also there.”

The fundamentals of the Chinese financial industry have not be improved. The regulation tightening risks are also there
Alex Wong Kwok-ying, Ample Capital

Ben Kwong Man-bun, a director at KGI Asia, said there are also concerns over US interest rate movements. “The Hong Kong dollar is pegged to the US dollar, so we have to follow any US rate rise,” said Kwong. “The market will still be full of uncertainties until the Jackson Hole meeting this Friday, which will offer a clearer indication on the pace of US interest rate movements.”

Hong Kong stocks trended downwards after a strong opening on Wednesday, with some speculators blaming the negative sentiment on news that North Korea had fired another ballistic missile in waters near Sinpo. It flew about 500km before falling into the Sea of Japan.

However, Kwong said the North Korean missile test just provided an excuse for profit taking for Hong Kong investors.

“The Hong Kong stock market has risen for some time. The North Korean missile flight was good timing to allow investors to sell shares and lock in their gains,” he added.

Wong from Ample Capital agreed, saying, “The North Korean missile test is totally an excuse and it made no difference to Hong Kong stocks’ decline.”

Tokyo’s Nikkei 225 gained 0.61 per cent to close Wednesday at 16,597.30.

On the outlook for the Hong Kong market, Wong said investors remain cautious with good news already digested, but he is not be bearish, expecting the city’s benchmark to swing between 22,600 and 23,000.

Mainland Chinese stocks also dropped on Wednesday. The Shanghai Composite Index lost 0.12 per cent to 3,085.88 while the CSI 300 –which tracks the large caps listed in Shanghai and Shenzhen – fell 0.36 per cent to 3,329.86. The Shenzhen Composite Index rose 0.31 per cent to 2030.28, the Shenzhen Component Index rose 0.09 per cent to 10,760.44 and the Nasdaq style ChiNext rose 0.83 per cent to 2,192.17.

China’s central bank on Wednesday injected cash into money markets through 14-day reverse repurchase agreements for the first time since February, amid speculation policy makers are looking to increase the use of more expensive, longer-term funding to cool a bond rally.