Hong Kong stocks fall to reverse a four-day gain, rattled by Turkish crisis

The weakening Turkish lira, weighing on the Hong Kong dollar and Chinese yuan, has driven investors to offload shares of Chinese state firms

PUBLISHED : Friday, 10 August, 2018, 6:31pm
UPDATED : Friday, 10 August, 2018, 6:31pm

Hong Kong’s stock market snapped four days of gains on Friday as worries over the plunging Turkish lira sent global markets lower and buoyed the US dollar as a safe haven asset.

The lira tumbled to a fresh record low, weighed down by mounting fears of Turkey’s authoritarian trajectory under President Tayyip Erdogan, with the economy heading for a hard landing.

“Turkey’s lira weakening is weighing on Hong Kong dollar and China’s yuan, as well as the stock markets,” said Louis Wong Wai-Kit, director of Philip Capital Management. “Because of that, investors particularly want to offload Chinese state-owned enterprise stocks.”

The Hang Seng Index dropped 0.8 per cent, or 240.68 points, to 28,366.62 and the Hang Seng China Enterprises Index also eased 0.7 per cent, or 76.85 points, to 10,943.08.

Among other Asian markets, Japan’s Nikkei 225 fell 1.3 per cent, or 300.31 points, to 22,298.08, South Korea’s Kospi was down 0.9 per cent and Australia’s All Ordinaries lost 0.3 per cent.

Internet giant Tencent Holdings slid 0.7 per cent to HK$370, knocking 20 points off the benchmark index. Sunny Optical Technology Group fell 1.6 per cent to HK$126.40, snapping three days of gains.

Oil-related stocks retreated for a second day. CNOOC lost 1.5 per cent to HK$12.76, Sinopec Corp was down 2.3 per cent to HK$7.39 and PetroChina was 1.5 per cent lower at HK$5.93.

Chinese financials retreated, with the Industrial and Commercial Bank of China falling 0.9 per cent to HK$5.78 and China Construction Bank dropping 1 per cent to HK$7.02. Ping An Insurance Group eased 0.6 per cent to HK$71.95.

Hang Seng Bank, the city’s largest bank, also dropped 3.5 per cent to HK$209, the worst performing blue chip on Friday.

But Chinese property developers bucked the decline. China Evergrande Group climbed 8 per cent to HK$28.35 after it reported that the aggregate contracted sales of the group’s properties totalled about 344.84 billion yuan for the period from January to July 2018. It is also considering paying a dividend for the financial years of 2016 and 2017.

Other developers also rose on reports that the ICBC and Agricultural Bank of China in Shanghai would cut mortgage rates – increasing the discount off the benchmark rate to 10 per cent from 5 per cent – for first-time homebuyers to revive a sluggish property market. Both banks denied the reports after the market close.

Turkey’s lira weakening is weighing on Hong Kong dollar and China’s yuan, as well as the stock markets
Louis Wong Wai-Kit, Philip Capital Management

Guangzhou R&F Properties gained 5.6 per cent to HK$15.02. Agile Group Holdings advanced 4.7 per cent to HK$12.34 and Sunac China Holdings jumped 5.5 per cent to HK$26.10.

The mainland market reversed morning losses to finish slightly higher.

The CSI 300 – which tracks large caps listed in Shanghai and Shenzhen – edged up 0.2 per cent, or 7.49 points, to 3,405.02 and the Shanghai Composite Index ended virtually flat at 2,795.31.

The Shenzhen Composite Index tacked on 0.7 per cent, or 10.33 points, to 1,515.96 and the Nasdaq-style ChiNext rose 0.9 per cent, or 14.10 points, to 1,511.71.

China Vanke jumped 3.1 per cent to 23.18 yuan, China Merchants Shekou Industrial Zone Holdings was up 2.6 per cent to 17.27 yuan and Poly Real Estate gained 1.5 per cent to 11.70 yuan.