Hong Kong shares rebound after pounding as investors seek bargains in tech and financials

But China stocks decline further as investors remain cautious amid further tightening fears by PBOC ahead of next week’s Fed policy meeting

PUBLISHED : Thursday, 07 December, 2017, 9:23am
UPDATED : Thursday, 07 December, 2017, 10:12pm

Hong Kong stocks ended slightly higher on Thursday as investors snapped up shares that were hammered in the sell off on Wednesday, but investors remained wary that more downward action could still be in store because of profit-taking in the run up to the year-end.

Mainland markets dropped further on rising concerns that the central bank may tighten liquidity conditions ahead of the Federal Reserve’s policy meeting next week.

The Hang Seng Index rose 0.3 per cent to 28,303.19 after posting its biggest decline in a year on Wednesday. The main board’s turnover was HK$121 billion (US$15.48 billion), compared to the average of HK$85.54 billion in the past year. The Hang Seng China Enterprises Index eased 0.11 per cent or 11.85 points to 11,150.73.

“It’s a rebound following terrible losses,” said Francis Lun, chief executive at GEO Securities. “There is some bargain hunting, at least for Tencent and the financials – HSBC, China Construction Bank and ICBC.

“It is half-hearted loss covering, short covering and some bargain hunting, but not a whole recovery yet. ”

Internet giant Tencent Holdings rebounded 3.3 per cent to HK$378 after touching a five-week low on Wednesday. Ping An Insurance (Group) rose 2.4 per cent to HK$74.75 after sliding 4.3 per cent in the previous session in its biggest daily drop since July 2015.

Apple parts supplier AAC Technologies Holdings rose 3 per cent to HK$143, but it is still heading for a third straight week of losses.

Sunny Optical Technology (Group), China’s largest manufacturer of smartphone camera modules and lenses,gained 2.5 per cent to HK$111.70, after a more than 4 per cent drop in the prior session.

Banks were firm, with HSBC Holdings edging up 0.2 per cent to HK$76.25, China Construction Bank Corp up 0.1 per cent to HK$6.65 and China Merchants Bank adding 0.5 per cent to HK$29.65.

However, property stocks continued to drop, with Country Garden Holdings sliding 1.9 per cent to HK$12.28 and Evergrande sinking 3 per cent to HK$24.55.

Geely Automobile Holdings also retreated for a third day, shedding 2.6 per cent to HK$24.45.

“Consolidation mode remains dominant, mainly because the market is still taking profit from gainers of the year,” said Stanley Chan, director of research at Emperor Securities.

Mainland markets fell, pressured by worries that the People’s Bank of China will tighten monetary policy with the approach of Fed meeting next week when it is expected to raise interest rates.

China has kept its benchmark lending interest rate flat this year but it has been tightening monetary policy through adjusting interest rates higher on its reverse repo rates in open market rates and medium lending facility three times this year.

Sun Guofeng, director general of Financial Research Institute of the PBOC, said on Tuesday that emerging economies should start to normalise the stance of monetary policy and exit from monetary stimulus introduced during the financial crisis.

Bank of Korea has led the way in Asia with a 25 basis point rate increase delivered last Thursday.

“Mainland China markets remained weak. Market sentiment was also cautious – they are concerned about liquidity and regulatory risk is still there,” Chan said.

The Shanghai Composite Index eased 0.7 per cent, or 21.92 points, to 3, 272.05 and the CSI 300 slid 1.1 per cent, or 44.76 points, to 3,971.06.

The Shenzhen Composite Index lost 0.6 per cent to 1,868.42, while the ChiNext fell 0.4 per cent to 1,776.99.