Talk of delays to Tencent’s new video game casts shadow on Hong Kong stocks

Analysts see the declines as only temporary, and expect mainland Chinese funds to resume buying

PUBLISHED : Wednesday, 29 November, 2017, 9:21am
UPDATED : Wednesday, 29 November, 2017, 6:31pm

The correction in Hong Kong continued on Wednesday, with financial and technology stocks leading the decline, although analysts expected the benchmark index to resume gains soon.

The Hang Seng Index dropped 0.2 per cent, or 57.02 points, to 29,623.83, while the Hang Seng China Enterprises Index fell 0.5 per cent, or 57.60 points, to 11,647.98.

“I think investors adopted a wait-and-see attitude, especially on the US tax reform and the performance of the market in China,” said Stanley Chan, director of research at Emperor Securities. “The stock market didn’t have any direction.”

Hong Kong’s markets have been tracking declines in mainland Chinese shares over the last two days, with insurers and banks behind the falls on concern that increasing regulatory oversight by Chinese authorities could negatively affect liquidity. However, the falls were likely to be limited, analysts said.

“I think this kind of condition will remain for a short period of time, until some uncertainties can be cleared,” Chan said.

Tech stocks declined, with internet giant Tencent losing 1.8 per cent to HK$411.60.

“Tencent had some pressure because there was news that their new game will be delayed,” Chan said. “Their performance affected the whole market sentiment quite a lot. If Tencent remains in consolidation mode, the market will still trade at this level and not have much momentum to go up.”

SMIC, China’s largest contract chip maker, slid 3.2 per cent to HK$10.84 and AAC Technology, a supplier of miniature electronics components to Apple, dropped 3.3 per cent to HK$166.60 – the worst performing blue chip on Wednesday.

Among financials, AIA fell 0.5 per cent to HK$65.95, Ping An was down 1.9 per cent to HK$80.00 and China Construction Bank slipped 0.3 per cent to HK$6.88. Bank of China fell 0.3 per cent to HK$3.80.

But HSBC rose 1.4 per cent to HK$78.00.

“I’m not too worried about the volatility in the market as it is normal for investors to take some profit in large caps after they had risen so much previously,” said Kingston Lin King-ham, director at securities brokerage AMTD.

“The market will probably resume increases next week, with mainland funds returning to the city again given subdued A shares.”

Elsewhere, Microware Group jumped 13.2 per cent to HK$1.29 after reporting a profit of HK$15.32 million in the first half of the year, up 11 per cent from the same period last year.

Link Reit gained 0.50 per cent to HK$70.35 after it announced plans to sell 17 properties for HK$23 billion (US$2.95 billion) to a consortium led by Gaw Capital Partners. Earlier in the day it reached HK$72.30, a record high.

Great Wall emerges as second-biggest partner among buyers of Link Reit’s 17 shopping malls

Bank of America Merrill Lynch reiterated its recommendation to buy shares of Link Reit, saying the disposal of 17 malls could boost its performance.

In mainland China, the Shanghai Composite Index rose 0.1 per cent, or 4.21 points, to 3,337.86 while the CSI 300 – which tracks larger companies listed in Shanghai and Shenzhen – dropped 0.05 per cent, or 2.07 points, to 4,053.75, while the Nasdaq-style ChiNext shed 0.4 per cent, or 6.49 points, to 1,787.38.

Beijing has recently stepped up efforts to manage excessive risk in the financial markets, triggering concerns that Chinese bond yields will continue their ascent while stocks will underperform global peers because of tighter liquidity conditions.

News that North Korea had fired a powerful intercontinental ballistic missile that landed in the sea close to Japan early on Wednesday did not have much impact on the market, with Nikkei 225 up 0.5 per cent to 22,597.20. Sydney’s All Ordinaries rose 0.5 per cent but South Korea’s Kospi slipped 0.05 per cent.