China, HK stocks back-pedal as investors sort through uncertainties on trade, global growth

23-Jan-2019 Intellasia | South China Morning Post | 6:00 AM Print This Post

Hong Kong and mainland stocks got off to a weak start on Tuesday as uncertainty over global growth and the future of US-China trade relations hangs on investors’ minds.

By midday, the Hang Seng Index shed 0.92 per cent, or 249.39 points, to 26,947.15, with all but one subindex down. The Hang Seng China Enterprises Index lost 1.09 per cent, or 117.20, to 10,595.85.

On the mainland, the Shanghai Composite slipped 0.73 per cent, or 19.14 points, to 2,591.37, with all sub-indexes down, and the CSI 300 dropped 0.87 per cent, or 27.80 points, to 3,157.83.

Optimism over thawing trade relations between the US and China had lifted stocks on Monday, but seemed to fade after Bloomberg reported the two sides are making little progress on the key issue of intellection property protection.

The two sides are set to meet next week for further talks.

On Monday economic data from China showed the slowest growth in 28 years for the world’s now second-largest economy, highlighting risks to the outlook for global growth. Stocks were downbeat overnight in Europe with London’s FTSE 100 finishing virtually flat on the news. US markets were closed for the Martin Luther King Jr. holiday.

Meanwhile the International Monetary Foundation (IMF) issued its second downgrade in three months, predicting a 3.5 per cent global growth this year, down from the 3.7 per cent expected in October. It forecast the weakest pace in three years for 2019 and warned of the risks of trade tensions, setting the tone for the World Economic Forum.

The annual gathering in Davos, Switzerland, for world leaders kicks off Tuesday, though without Trump and UK prime minister Theresa May, who are dealing with a government shutdown and Brexit, respectively, at home.

A survey released by PwC found that 30 per cent of business leaders expect global economic growth to weaken over the next 12 months. Asian CEOs were slightly more optimistic than counterparts, with 50 per cent thinking global growth will improve in 2019, compared to 42 per cent globally.

Hong Kong is seeing a correction rather than a downward turn, said Castor Pang Wai-sun, head of research at Core Pacific-Yamaichi, predicting a short term target of 27,000 for the Hang Seng.

“Everyone knows that the overall economy is slowing down, that is normal,” said Pang. “After several years growth, under the current situation and particularly with the trade war, the global economy is slowing down.”

Among stocks in Hong Kong, Sino Biopharmaceutical and CSPC Pharmaceutical dragged the health care sub-index down 3.78 per cent. Sino shed the most among stocks, 5.14 per cent to be at HK$5.19 by midday, while CSPC lost 2.90 per cent to HK$12.74. According to Pang, the market still believes their valuations are too high.

Beijing has moved to prices of drugs and improve their efficacy and safety, putting companies under pressure to invest in developing innovative drugs.

“The major problem is that under the centralised bidding system, it seems their product price still has to go down further,” he said. “That will hurt their overall gross margin as well as the bottom line.”

Sun Hung Kai Properties, the city’s biggest home developer, dropped after reports it would redeem HK$400 million in bonds due 2024. By midday, the stock was down 0.32 per cent to HK$123.80.

Sunny Optical and AAC Technologies lost 3.04 per cent to HK$73.30 and 4.17 per cent to HK$46.00, respectively.

Apple’s cut on forecasts for the handset market, and a lack of expected new functions for handsets to be launched this year means such suppliers’ share prices are facing pressure, said Pang.

“There is no good news for mobile handsets,” he said.

Among other tech, Tencent fell 1.88 per cent to HK$333.60 by midday, poised to end 5 straight sessions of gains. It was again absent from China’s latest list of approved video games, released on Tuesday, after a freeze for much of last year.

Jiayuan International Group was down 16.11 per cent to HK$4.01 in morning trading. Last Thursday, the property developer, plunged 80.6 per cent to HK$2.52, wiping out HK$26.3 billion.

At a lunch Monday, the chair of the board of directors, Shen Tianqing, blasted recent media reports about the price collapse as false and misleading to investors, according to a report on QQ.com. Those earlier media reports claimed that banks sold company shares, which were used as collateral to borrow money, and that caused the crash in share price. He said that was not true and blamed the stock price plunge on short-selling agencies using the media to publish fake news and mislead investors, according to QQ.com.

He emphasized a stable financial position for Jiayuan.

Meanwhile, PetroChina dropped 2.34 per cent to HK$5.01. On Monday, it announced its expected net profit for 2018 to increase by RMB28 billion to RMB30 billion an increase of between 123 per cent to 132 per cent when compared to a year ago but warned of a $1.5 billion write-down from the disposal of some assets. Earnings could have risen as much as 149 per cent without the disposed assets.

Macau’s casinos were down in morning trading after Credit Suisse estimated the January gaming revenue is tracking between 10 per cent to 12 per cent year-on-year, which is weaker than expectations.

Galaxy Entertainment lost 2.48 per cent to HK$49.10 by midday, and Sands China was down 1.91 per cent to HK$35.90.

Geely Automobiles shed 4.71 per cent to HK$12.41 after UBS cut its target price from HK$23 to HK$12.8, though maintained its “buy” rating. Demand for automobiles and uncertainties on the industry were cited as reasons.

Brilliance China also fell 3.41 per cent to HK$6.51, despite Citi lifting its target price from HK$7.2 to HK$8.8.

The consumer price index data for Hong Kong is due to be released this afternoon.

https://sg.news.yahoo.com/china-hong-kong-stocks-back-031322382.html

 


Category: Hong Kong

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