Technology shares lead slump in Hong Kong after overnight rout in US equities

Hong Kong stocks fell on Wednesday, tracking a rout in US equities roiled by a sell-off in technology companies and rising bond yields. 

The Hang Seng Index dropped by 1 per cent, or 308.09 points, to 30,328.15 by close of trading on Wednesday. The Hang Seng China Enterprises Index, or the H-share gauge, also declined by 1.2 per cent. The mainland’s benchmark gauge fared slightly better with a 0.4 per cent loss, as negative sentiment was partially offset by the prospect that China’s central bank will loosen monetary policies.

Other major markets in Asia – Japan, South Korea and Taiwan – also fell, with benchmarks in these regions shedding at least 0.4 per cent. Technology stocks fared badly across the board. 

US stocks tumbled in overnight trading as technology and industrial shares bore the brunt of selling, and the yield on 10-year treasury bonds rose above 3 per cent for the first time in four years. The Dow Jones Industrial Average and the Nasdaq Composite Index both dropped 1.7 per cent, while the S&P 500 Index retreated by 1.3 per cent.

Technology companies were among the worst performers on the Hang Seng Index too. Apple suppliers Sunny Optical Technology (Group) fell by 3.1 per cent to HK$130.70 (US$16.65) and AAC Technologies Holdings declined by 1.3 per cent to HK$117.40. Tencent Holdings shed 2.5 per cent to HK$386.80.

“Technology shares have dropped significantly, partly because the US market is still fluctuating and investors do not feel positive,” said Gordon Tsui, the head of fixed income at Talking Asset Management.

“Market sentiment is still in a state of observing its ups and downs, especially regarding technology companies, after the recent US sanctions on Chinese company ZTE. Because of this, I think the market will be trending downwards in the short term.”

WH Group, the Chinese meat processor, plunged by 9.5 per cent to HK$7.80 after Goldman Sachs lowered the share price and earnings forecast for the company, citing a significant profit drop in its US pork business in the first quarter.

Goldin Financial Holdings, a Hong Kong investment conglomerate, grew by 8.9 per cent to HK$3.81 on a plan to sell two pieces of land for HK$12.4 billion.

On the mainland, the Shanghai Composite Index closed Wednesday’s trading session down by 0.4 per cent at 3,117.91, following a 2 per cent surge on Tuesday, after hints were dropped during a Politburo meeting that suggest policy loosening might be on the cards.

The loss in mainland equities was limited after a report by Market News International cited an official at the People’s Bank of China as saying the central bank could make more cuts to the reserve requirement ratio.

Meanwhile, US Treasury Secretary Steven Mnuchin will visit China to negotiate trade disputes with Beijing within days. There was a good chance the two countries would strike a deal, US President Donald Trump said in a meeting with his French counterpart, Emmanuel Macron. If the two sides are not able to reach an agreement, Trump said, proposed tariffs worth billions of dollars will be imposed on Chinese goods as planned.

CEFC Anhui International Holding, a unit controlled by financier Ye Jianming, who is now under scrutiny for suspected economic crimes, tumbled by the 10 per cent daily limit to 4.85 yuan in Shenzhen. Its parent company halted a plan on ownership change, CEFC said in an exchange filing. The stock resumed trading on Wednesday after being suspended over the past month.