Hong Kong stocks snap 6-day rally as technology shares decline

Hong Kong’s stock market snapped a six-day rally on Tuesday, with declines driven by losses in technology shares and as Washington and Beijing resume a second round of trade negotiations this week.

The Hang Seng Index fell 1.23 per cent, or 389.05 points, to 31,152.03 while the Hang Seng China Enterprises Index dropped 0.83 per cent, or 103.80 points, to 12,440.75. The Hong Kong dollar also continued to hover around the weak end of its trading band, reflecting capital outflows from assets denominated in the currency.

Index heavyweight Tencent Holdings fell 3.35 per cent to HK$398, its biggest daily drop since March 28, ahead of its first-quarter earnings release on Wednesday.

“Investors are taking profit today after a strong rally and are just sitting on the sidelines to see if Tencent’s results can provide an impetus for a further market rebound,” said Kingston Lin King-ham, director of AMTD securities brokerage.

China’s top economic official Liu He arrives in Washington today for five days of trade talks after initial discussions earlier this month appeared to make little progress.

“As the negotiations continue, the US and Chinese demands will evolve. However, prolonged uncertainty about the measures they may implement to achieve these evolving objectives could negatively impact investment and growth in both countries,” said Martin Petch, a senior credit officer at Moody’s Investors Services.

China reported mixed economic data for April on Tuesday, suggesting moderation in second-quarter growth. Industrial production rebounded to a 7.0 per cent annual increase, from 6.0 per cent in March, but fixed-asset investment expanded at the slowest pace since 1999. Retail sales also softened to a four-month low.

AAC Technologies Holdings slumped 4.92 per cent to HK$110.10, the worst performing blue chip. The company, which supplies Apple with miniature electronic components, slid for a second day after a series of brokers cut their target prices following weaker than expected first-quarter net profit results on Monday.

Financial firms also suffered sharp losses. AIA Group dropped 1.68 per cent to HK$73.10 and Industrial & Commercial Bank of China slid 1.72 per cent to HK$6.87. Bourse operator Hong Kong Exchanges and Clearing was lower by 1.66 per cent at HK$261.20.

Mainland stocks rose on Tuesday after MSCI unveiled the list of 234 yuan-denominated A shares to be added to the widely-tracked benchmark MSCI Emerging Market Index, effective from June 1.

Howard Wang, head of Greater China equities at JP Morgan Asset Management, forecasts China’s A shares could account for 9 per cent of the MSCI EM index and 1 per cent of the All Country World Index, bringing in about US$230 billion of index flows over the next five years.

The Shanghai Composite Index gained 0.57 per cent, or 18.09 points, to 3,192.12 while the CSI 300 – which tracks the large caps listed in Shanghai and Shenzhen – increased 0.38 per cent, or 14.81 points, to 3,924.10.

The Shenzhen Composite Index climbed 0.91 per cent, or 16.63 points, to 1,839.88 while the Nasdaq style ChiNext rose 1.48 per cent or 27.03 points to 1,858.01.

Compared with a provisional list released in March, MSCI added 11 newcomers to a third index, the MSCI China A Inclusion Index, which has incorporated A shares since October.

Among the 11 stocks, Ninestar, an integrated circuit chip maker, soared 7.57 per cent to 31.55 yuan, Tonghua Dongbao Pharmaceutical also surged 5.50 per cent to 30.07 yuan and Shanghai Electric jumped 4.06 per cent to 6.15 yuan. Shandong Buchang Pharmaceuticals and Tongwei, which makes and distributes foodstuff, rose 1.67 per cent and 2.45 per cent to 50.62 yuan and 12.95 yuan, respectively.