Hong Kong stocks slip for second session as trade war, interest rate uncertainties weigh
The Shanghai index however posted its best five-day performance since May 11
Hong Kong stocks fell for a second session on Friday as intervention by the city’s de facto central bank to prop up the currency raised concerns over interest rates and as talks between the US and China over their trade war failed to make progress.
The Hang Seng Index dropped 0.4 per cent, or 118.59 points, to 27,671.87 and the Hang Seng China Enterprises Index fell 0.3 per cent, or 34.89 points, to 10,779.71.
Investors took profits ahead of the weekend and because of uncertainty over the trade talks,” said a strategist at Everbright Sun Hung Kai Investment.
“But the declines were mild, given hopes for strong earning releases by Chinese banks next week.”
Uncertainty over the escalating trade spat, along with expectations of higher US interest rates and a stronger US dollar, are weakening the Hong Kong dollar, forcing the Hong Kong Monetary Authority (HKMA) to intervene again in the currency market.
The HKMA bought HK$1.77 billion and sold US$225 million during New York trading hours on Thursday. The likely consequence will be a withdrawal of banking liquidity, putting pressure on commercial banks to raise prime interest rates and raising the price of mortgages. That in turn is dampening sentiment in the stock market.
In Friday trading, insurer AIA Group slid 2.7 per cent to HK$66.15, making it the worst performing blue chip and knocking 68 points off the benchmark index. The company reported a decline in interim net profit of more than 50 per cent to US$1.66 billion, missing analyst forecasts.
