Hong Kong markets quiet amid interest rate uncertainties

Hang Seng sheds 0.08 per cent on Tuesday, ahead of closely-watched monetary policy meetings in Tokyo and Washington

PUBLISHED : Tuesday, 20 September, 2016, 9:21am
UPDATED : Tuesday, 20 September, 2016, 10:55pm

Hong Kong stocks ended the day little changed as markets remain uncertain ahead of monetary policy meetings beginning in Japan and the United States.

The Hang Seng Index lost 0.08 per cent or 19.59 points to close at 23,530.96, while the Hang Seng China Enterprises Index rose fractionally, ending up 0.04 per cent or 3.69 points at 9,751.44.

KGI Asia director Ben Kwong Man-bun said investors are hunkered down on the sidelines while they await cues on the mindset of the two countries’ central bankers.

The Bank of Japan began a two-day policy board meeting on Tuesday, and The Federal Reserve will meet later in the day.

As a result, total volume of stocks traded was at 1.35 billion, down from the five-day average volume of 1.68 billion.

Coal stocks were the biggest gainers on Tuesday following statements by the oil minister of Venezuela, the world’s eighth largest net oil exporter, who said global oil supply needs to fall by one tenth to match consumption.

As oil prices fell to six-week lows, the coal sector gained 1.37 per cent, led by Kiu Hung International Holdings, which rose 12.36 per cent, and major player China Shenhua Energy, up 1.67 per cent.

Casino stocks fell after Nomura analysts raised concerns about the sustainability of Macau’s gross gambling revenue. Galaxy Entertainment sank 2.17 per cent, Wynn Macau was off 2.04 per cent and China Vanguard tumbled 1.72 per cent.

Local property developers fell, giving back some gains from Monday’s session following positive real estate data, with Henderson Land easing 0.87 per cent and CK Property sliding 1.32 per cent, while Sino Land gained 0.28 per cent.

Hong Kong is likely to remain on edge as investors take a wait-and-see approach ahead of Wednesday’s conclusion of the Fed’s monthly rate-setting policy board meeting, although most observers don’t expect any changes to the near-zero interest rate currently in place.

“People are very risk averse right now,” said Capital Link Investment Holdings chairman and chief executive Brett McGonegal. “You’re going to get some real volatility in the next few days.”

He expects the Hong Kong market to remain in defensive mode, although uncertainties over interest rates may spark some buying in mainland equities as investors rotated out of the United States and Japan.

Haitong International Securities sales trader Andrew Sullivan said he expected Hong Kong to trade sideways for the next two days.

The Shanghai Composite Index fell 0.10 per cent or 3.05 points to close at 3,023.00 while the CSI 300 dropped 0.18 per cent or 5.72 points to 3,257.40.

The Shenzhen Composite Index fell 0.06 per cent to 10,544.53 while the Nasdaq-style ChiNext shed 0.31 per cent to 2,158.43.

All three major US indexes closed slightly down or little changed on Monday, with the Dow Jones Industrial Average finishing 0.02 per cent lower at 18,120.17 and the S&P 500 closing flat at 2,139.12. Meanwhile, the Nasdaq Composite was down 0.18 per cent to 5,235.03.

Oil prices rose after lows last week on hints that OPEC members could agree to a deal to freeze output , with Brent crude futures LCOc1 gaining 0.4 per cent to settle at US$45.95 a barrel.

Both the Bank of Japan and the Federal Reserve are due to start two-day policy rate meetings on Tuesday.

“The Bank of Japan is in focus with many thinking they will cut rates further into negative territory as 2 per cent inflation remains elusive,” Sullivan said.

Traders anticipate a relatively low likelihood of a US policy rate change, with only 12 per cent believing the Fed will announce a change to the status quo at its two-day monthly policy board meeting, according to CME Group.

In other Asian trading on Tuesday, Tokyo’s Nikkei 225 fell 0.16 per cent by market close. South Korea’s Kospi was up 0.49 per cent and in Sydney the All Ordinaries was up 0.07 per cent.