Hong Kong stocks head for biggest loss since June, China slides

A Chinese national flag and a Hong Kong flag fly outside the Legislative Council in Hong Kong, China November 7, 2016. (Reuters pic) 

HONG KONG: Hong Kong’s Hang Seng Index headed for its biggest loss since June 19 and stocks in mainland China also weakened, rattled by a possible escalation in the US trade war and wider turmoil in emerging markets.

The Hang Seng Index was down 2.2% as of 2.04pm in Hong Kong. Tencent Holdings Ltd was the biggest drag, though all 50 companies on the benchmark declined. The Shanghai Composite Index fell 1.2% to within 80 points of its lowest intraday level since February 2016. The yuan was little changed onshore at 6.8425 per dollar.

Investors are waiting to see if the US goes ahead with tariffs on another US$200 billion of Chinese goods, which would mark a significant escalation in a trade dispute that has dogged the country’s equity market for much of this year. People familiar with the matter say President Donald Trump could press ahead with the levies straight after a public-comment period concludes on Thursday.

“The market has been sluggish, with any rebound followed by immediate profit-taking,” said Toni Ho, an analyst with Rhb Osk Securities Hong Kong Ltd. “Uncertainty remains as investors focus on whether the US will implement tariffs on US$200 billion-worth of Chinese goods. Investors would prefer short-term trades amid cautious sentiment.”

Bloomberg reported Wednesday that China’s central bank drained money from the short-term money market in August and added hundreds of billions of yuan via repurchase agreements and increasing medium-term lending, according to people familiar with the matter. Such measures would be aimed at complementing efforts to support lending to the real economy.

Concern over a slowdown in the domestic economy and a weakening yuan have also contributed to wiping about US$2.4 trillion from China’s stock market since January. The Hang Seng Index has tumbled 17% in a little over seven months, with Tencent – still a favourite among investors – crashing 31% amid earnings and regulatory uncertainty. Citigroup Inc has now lowered its revenue estimates for the Chinese Internet giant.

Automakers were among the worst performers Wednesday. Great Wall Motor Co slid 4.2%, the worst performer on the Hang Seng China Enterprises Index, on concern over the impact of its price cuts and a slowdown in SUV sales. Dongfeng Motor Group Co was next worst, down 3.5%.

Property developers also fell. China Vanke Co dropped 3.4% and Country Garden Holdings Co slid 4.3% in Hong Kong, while Poly Real Estate Group Co was the hardest hit on the Shanghai property gauge, retreating 3.3%. Rhb’s Ho said investors may be taking profit after developers climbed late last month after positive first-half earnings.