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China stock market

Hong Kong, mainland markets sluggish as investors remain cautious about progress to end US-China trade war

  • Two-days of trade talks end in Beijing; US senior official sees ‘good chance’ for settlement
  • Geely Automobile Holdings plunges 11.3 per cent as downgrade stings
PUBLISHED : Tuesday, 08 January, 2019, 10:23am
UPDATED : Tuesday, 08 January, 2019, 6:27pm

Hong Kong and mainland stocks closed little changed Tuesday as investors remained cautious about progress toward ending the US-China trade war.

The Hang Seng Index edged up 0.15 per cent, or 39.75 points to end at 25,875.45. Turnover was low, at $74.5 billion, suggesting that investors were not confident about the performance outlook for the index and were moving already-invested capital into different sectors rather than putting new money into shares.

“Investors are sitting on the sidelines in general, as they are just rotating money in different sectors in recent weeks. We don’t see any sustainable rally in any given sector, as buying remains speculative in nature driven by short-term news flow,” said Ben Kwong, executive director at KGI Asia.

Meanwhile, the Shanghai Composite Index slipped 0.26 per cent, with banking-related shares leading the decline.

Chinese VP Liu He makes surprise appearance on first day of China-US trade talks, despite absence of America’s heavy hitters

Two days of talks in Beijing ended Tuesday. Though the trade talks were set to be at a “vice-ministerial” level, a surprise appearance was made by Chinese Vice-Premier Liu He – the top economic aide to President Xi Jinping, who has been in charge of trade discussions with Washington.

In Hong Kong, some property stocks performed well: CK Assets rose 3.3 per cent to $62.5, CK Hutchison Holdings gained 2 per cent to $77.35, and Sun Hung Properties gained 1.1 per cent to $119.5.

China’s team of crack trade negotiators will extract their ‘pound of flesh’, experts say

Late last week, Hong Kong government’s financial secretary hinted at a potential relaxation of the loan-to-value ratios of mortgages extended to first-time homebuyers, meaning these potential buyers will need to fork out smaller down payments. No timetable was given on when this might happen.

“Investors likely see it as the Hong Kong government taking more measures to prevent further price slump in the local property market, and hence bought property counters given also the fact that property is one of the less risky sectors in the blue chip index,” said Kwong, adding some of the property stocks’ high dividend yields appeal to investors.

Chinese carmaker Geely’s shares plunge 11.6pc after annual sales fall short of target, warns of dismal year ahead

One of the big losers of the day was Geely Automobile, which dropped 11.3 per cent, to $10.22. The mainland carmaker disclosed in a stock exchange filing that it missed its sales target for 2018 following a 44 per cent drop in sales in December alone, from a year ago. It was the third-most traded stock in turnover, with HK$1.97 billion changing hands.

Elsewhere, Chinese smartphone maker Xiaomi dropped 7.5 per cent to $11.1, after JPMorgan lowered its target price to HK$18 from HK$10.5, and downgraded its rating to “neutral” from “overweight” this week. The US investment bank also lowered its earning forecasts given China’s weaker demand for smartphones.

In Hong Kong, vessel chartering firm and money lender Noble Century stole the limelight as the second top percentage gainer. It rose 30.5 per cent to HK$1.24, after it disclosed in an announcement that it would acquire ChaoShang Financial Holding for HK$250 million (US$31.90 million) following trading on Monday.

In China, the Shenzhen Component Index closed down 0.12 per cent, or 8.55 points to 7,391.65.

In Shenzhen, turnover for the Shenzhen Component Index totalled 176.4 billion yuan; while turnover for the Shanghai Composite Index stood at 123.4 billion yuan.

In Shanghai, leading the index down were banking stocks: the Agricultural Bank of China dropped 1.12 per cent to 3.53 yuan, and the Industrial and Commercial Bank of China dropped 0.76 per cent to 5.2 yuan.

“Investors were concerned that the worsening economic outlook in China would impact earnings of Chinese banks. But even if the US and China trade dispute is resolved soon, it still takes time for the fundamentals of Chinese banking stocks to show improvement, given the slowing down of the Chinese economy cannot be staved off overnight,” said Kwong.

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