Hong Kong Stock Exchange

Hong Kong shares knocked lower, led by property stocks after HKMA raises interest rate

The Hang Seng Index closed 1.2 per cent lower on Thursday, led by declines in property and energy

PUBLISHED : Thursday, 15 June, 2017, 9:12am
UPDATED : Thursday, 15 June, 2017, 10:45pm

Hong Kong stocks closed lower on Thursday with the property sector leading losses after the city’s de facto central bank followed a US decision and lifted the base interest rate. Mainland markets closed with mixed but slight changes.

Hong Kong’s benchmark Hang Seng Index closed at 25,565.34, representing a drop of 1.2 per cent, or 310.56 points.

The Hang Seng China Enterprises Index of Chinese companies trading in the city shed 1.6 per cent, or 168.76 points, to close at 10,346.15.

Daily total market turnover was HK$71.77 billion, down from Wednesday’s HK$77.13 billion.

The Hong Kong Monetary Authority (HKMA) announced on Thursday morning that the base rate was adjusted upward by 25 basis points to 1.50 per cent with immediate effect, following the US Federal Reserve’s overnight move.

“The Hong Kong market has been cautious today following the announcement of the Fed’s surprising timetable for balance sheet normalisation,” Kenny Tang Sing-hing, chief executive of Junyang Securities, said.

After the Fed’s post-meeting press conference, a majority of Wall Street banks believe the central bank will begin reducing its US$4.5 trillion bond portfolio in September, a shift from expectations earlier in June when a majority believed the winding down would begin in December.

Tang said he believes the Hong Kong market is well supported at the 25,000 level.

Still, the adjustment in the base rate hit local property developers. Sino Land was down 1.3 per cent to HK$13.26, Sun Hung Kai fell 0.6 per cent to HK$5.05, New World Development dropped 2.3 per cent to HK10.34, and Hang Lung Group was off 4.1 per cent drop to HK$32.55.

Many blue chips also dragged lower. Tencent saw a 1.6 per cent drop to HK$273, HSBC Holdings was down 0.8 per cent to HK$67.8, and China Mobile dropped 0.8 per cent to HK$83.6. Insurer AIA fell 0.7 per cent to HK$55.55.

Energy companies were also poor performers as oil prices dropped below US$45 a barrel to a 5-week low on Wednesday after US government data showed an increase in gasoline stockpiles and crude production.

China Petroleum & Chemical lost 2 per cent to close at HK$6.4. CNOOC, China’s biggest offshore oil and gas producer, dropped 1.5 per cent to close at HK$8.62.

On the Chinese mainland, stocks ended mixed. The CSI 300 dropped 0.2 per cent, or 6.51 points, to 3,528.79, while the Shanghai Composite Index was up 0.1 per cent, or 1.82 points to 3,132.49. The Shenzhen Component Index added 70.16 points or 0.7 per cent to 10,221.69. The ChiNext gauge of smaller firms gained 1.4 per cent or 25.62 points to 1,816.26.

Major Chinese insurance and financial related A-shares were broadly lower. Ping An ended 2.2 per cent down and China Life also dropped 3 per cent.

Official data for May showed new yuan loans rose to 1.11 trillion yuan in May, up 126 billion yuan from the year earlier period, according to the People’s Bank of China. A broad measure of the money supply, M2, showed growth eased to 9.6 per cent year May on year, down from April’s 10.5 per cent growth and lower than the market consensus forecast of 10.4 per cent.

“The slightly disappointing results from M2 will bring tension in the market for a short period of time,” Tang said.