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

PUBLISHED : Friday, 24 August, 2018, 9:00pm
UPDATED : Friday, 24 August, 2018, 9:00pm

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.

China Life Insurance fell 1.6 per cent to HK$18.40 and Ping An Insurance Group eased back 0.4 per cent to HK$73.80.

Internet giant Tencent Holdings dropped 1.4 per cent to HK$354, AAC Technologies Holdings fell 2.7 per cent to HK$82.35 and lens maker Sunny Optical Technology Group lost 1.5 per cent to HK$92.05. Smartphone maker Xiaomi shed 2.3 per cent to HK$17.04.

Geely Automobile Holdings fell 1.7 per cent to HK$16.36 after Citigroup slashed its target price by 20 per cent to HK$36.50 in view of likely pricing pressure in the second half.

Agricultural Bank of China lost 0.3 per cent to HK$3.72, China Construction Bank also fell 0.3 per cent to HK$6.91 while China Everbright Bank dropped 0.9 per cent to HK$3.25.

On the positive side, Industrial and Commercial Bank of China rose 0.4 per cent to HK$5.73 ahead of its interim results due next Thursday. Brokers are projecting net profit in the range of 159.558 billion yuan (US$23.2 billion) to 161.917 billion yuan, up 4.3 per cent to 5.8 per cent from a year ago.

Brilliance China Automotive Holdings gained 2.4 per cent to HK$10.90 after announcing first-half net profit of 3.566 billion yuan, up 54.3 per cent year on year.

Mainland China stocks were mixed, with the Shanghai Composite Index gaining 0.2 per cent, or 4.81 points, to 2,729.43, bringing this week’s advance to 2.2 per cent – its best five-day performance since May 11.

The CSI 300 – which tracks the large caps listed in Shanghai and Shenzhen – added 0.2 per cent, or 5.31 points, to 3,325.33. The Shenzhen Composite Index slipped 0.2 per cent, or 3.36 points, to 1,460.33 and the Nasdaq style ChiNext dropped 0.4 per cent, or 5.41 points, to 1,450.09.