HK, Chinese stocks extend losses as sentiment sours on Fed outlook for recovery

18-Sep-2020 Intellasia | South China Morning Post | 6:02 AM Print This Post

Losses in Hong Kong and mainland Chinese stocks deepened on Thursday, tracking declines in the region and overnight US markets which reflected traders’ disappointment over the Federal Reserve’s take on the economic recovery outlook.

The Heng Seng Index dropped 1.6 per cent to 24,340.85 at the close, while the Shanghai Composite Index slid 0.4 per cent to 3,270.44. Both indices have retreated by more than 3 per cent this month, reining in a rally this quarter.

Top losers included Xiaomi Corp which retreated 6.4 per cent while Wuxi Biologics and Techtronic Industries each fell by 4 per cent and 3.1 per cent, respectively. City train operator MTR Corp led gainers, adding 1.8 per cent.

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While the Fed pledged its policy would remain accommodative, it also observed that the pace of economic activity is likely to slow and added that additional stimulus spending may be needed to support gains in the US job market.

The Fed statement “is no real surprise, but may disappoint those who were looking for more explicit guidance on how policy would respond to changing economic conditions,” Schroders chief economist Keith Wade wrote in a research note.

The Fed said gains in economic activity and employment in recent months remained well below their levels at the beginning of the year, following the conclusion of its last scheduled meeting before the November elections. The Covid-19 crisis continues to weigh on the economy, it added.

The Kospi Index fell 0.4 per cent, while the Nikkei 225 Index declined 0.7 per cent. Australia’s S&P ASX 200 Index slipped 1.2 per cent.

Losses in local markets may be limited as the Hong Kong Monetary Authority on Thursday disclosed about HK$130 billion (US$16.8 billion) in net inflows of funds into the Hong Kong dollar since April.

The liquidity was likely tied to investors vying for a slice of large-sized stock offerings in the city in recent months. The HKMA has stepped into the currency market numerous times this year to weaken the local dollar and prevent it from breaking the strong end of its trading band.

“Many investors would like to hold more cash to chase initial public offering (IPO) by Ant Group [in Shanghai and Hong Kong] as they believe the fintech giant could generate lofty returns upon trading debuts,” said Zhou Ling, a hedge fund manager with Shanghai Shiva Investment. “Performance of the A-share market is expected to be weak for the coming two weeks.”

Notwithstanding that, four new stocks soared on their debuts, buoyed by investors’ belief that they were undervalued based on the offering prices. Economic data in recent days are also pointing to nice traction in China’s post-pandemic recovery, including industrial production and retail sales.

Shenzhen XFH Technology, a materials company whose products include graphite anode and lithium ions used in electric-vehicle battery packs, soared 308 per cent to 60 yuan (US$9.42). Winner Medical, a Shenzhen-based manufacturer and distributor of health care supplies, rose 70 per cent from its IPO price to 126.25 yuan.

Guangdong Huiyun Titanium Industry, a producer of specialty chemicals including titanium dioxide use in anti-ultraviolet ray sunscreens, surged 527 per cent above its offer price of 3.64 yuan to 22.84 yuan.

Shanxi Huaxiang Group, which makes machinery parts such as crankshafts, cylinders, pistons, and flanges, jumped by its 44 per cent daily limit to 11.62 yuan, compared with its offer price of 7.82 yuan on the mainboard of Shanghai Stock Exchange.


Category: Hong Kong

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