China stock market

Heightened Middle East tension, possibility of steeper Fed rate rises weigh on Hong Kong stocks

Benchmark Hang Seng Index ends day 0.22 per cent lower at 30,831.28

PUBLISHED : Thursday, 12 April, 2018, 9:18am
UPDATED : Thursday, 12 April, 2018, 11:25pm

Hong Kong stocks fell on Thursday, led by Tencent, AIA and Galaxy as escalating geopolitical tension in the Middle East and the Federal Reserve leaning towards faster pace of interest rate rises weighed on investor sentiment.

The Hang Seng Index finished down 0.22 per cent, or 66.43 points, at 30,831.28, with its turnover shrinking to HK$100.97 billion (US$12.86 billion) from Wednesday’s HK$132.98 billion. The Hang Seng China Enterprises Index fell 0.29 per cent or 35.82 points to 12,288.86.

Major blue-chip stocks were weak. Chinese online major Tencent Holdings declined 1.53 per cent to HK$413.20, knocking off 45 points off the benchmark index. Galaxy Entertainment Group was the worst performing blue chip, sliding 2.95 per cent to HK$70.85.

Financials also performed poorly. AIA Group dropped 1.40 per cent to HK$70.60, China Life Insurance lost 0.45 per cent to HK$21.95 and China Construction Bank edged down 0.12 per cent to HK$8.12.

Chinese property developers fell as Bank of America Merrill Lynch downgraded Country Garden Holdings and China Vanke. The shares of the companies dropped 0.24 per cent to HK$16.70 and 0.57 per cent to HK$34.70 respectively. China Evergrande Group also tumbled 2.85 per cent to HK$27.30.

Some external factors have weakened investor confidence, analysts said.

“The Fed’s March meeting minutes indicated it is leaning towards a faster pace of interest rate rises, while most officials were worried about the impact of a trade war on the US economy,” said Sam Chi-yung, a senior strategist for South China Financial Holdings.

Tensions have flared after US President Donald Trump said on Twitter that missiles “will be coming” at Syria [in the wake of an alleged chemical attack by the Assad regime], and warned Russia to “get ready”, denting risk appetite in the markets, he added.

Oil shares jumped as crude futures surged after Trump’s tweets and reports that Saudi Arabia, a major oil producer, had intercepted a missile over its capital city of Riyadh from Yemen’s Houthi rebels, adding to market concerns about rising geopolitical tensions. WTI crude futures traded near its highest level since 2015 at US$66 per barrel.

CNOOC climbed 3.66 per cent to HK$12.46, PetroChina advanced 2.89 per cent to HK$5.69 and Sinopec gained 0.41 per cent to HK$7.43.

Mainland markets also fell. The Shanghai Composite Index declined 0.87 per cent to 3,180.16, the large-cap CSI 300 slid 1 per cent to 3,898.64 and the Shenzhen Composite Index was lower by 0.58 per cent at 1,840.27. The start-up board index ChiNext eased 0.42 per cent to 1,826.89.

Mining and power stocks saw strong selling pressure. China Molybdenum slid 3.39 per cent to 8.26 yuan, Shaanxi Coal Industry tumbled 3.18 per cent to $7.60 yuan and Zhengzhou Coal Industry & Electric Power dived 8.43 per cent to 5.43 yuan. Henan Dayou Energy was down 6.06 per cent to 4.65 yuan.

Some Chinese manufacturing stocks plunged by their daily limit of 10 per cent, including Wuxi Acryl Technology to 42.81 yuan, Great-Sun Foods to 32.86 yuan and Raisecom Technology to 20.15 yuan.

Other Asia markets were also downbeat. Japan’s Nikkei Average dipped 0.12 per cent to 21,660.28, Australia’s Sydney All Ordinaries dropped 0.24 per cent to 5,911.40, and Taiwan’s Taiex lost 0.17 per cent to 10,955.29.