HK stocks set to be world’s worst

Hang Seng Index back below its 50-day moving average earlier this week, just days after rising above it. (Reuters pic)

SHANGHAI: Hong Kong stocks are poised to end the week as the world’s worst performers.

While the Hang Seng Index tiptoed into a slim gain Friday, the gauge was heading for a weekly decline of 3.3% as of 11:33 a.m.

It dipped back below its 50-day moving average earlier this week, just days after rising above it.

Local unrest and the trade war have conspired to drag shares lower, while the Federal Reserve’s rate cut this week was seen unlikely to feed into the cost of credit for businesses and households in a city whose dollar peg means that it imports US monetary policy.

Months of protests have unnerved investors and consumers and raised the prospect of capital flight.

A range of indicators weakened sharply in July and August, signalling that the city could tip into recession.

Fitch Ratings Inc. this month downgraded Hong Kong as an issuer of long-term foreign currency debt for the first time since 1995.

“The protests are the biggest drag on sentiment and unless that issue is resolved the market will remain weak,” said Alvin Cheung, associate director of Prudential Brokerage Ltd.

“The government expects a big hit to the city’s economy in the second half, and that could filter through to corporate earnings and weigh on the Hang Seng Index.“

MTR Corp. was heading for a 5-day decline of 2.5%, ending a week during which one of its trains derailed in Hong Kong, dealing a fresh blow for the developer and subway operator that has become a target and battleground in the anti-Beijing demonstrations rocking the city.

A stock gauge of property developers was heading for a 2.5% drop.