HK shares snap losing streak as Fed hints at rate cut

06-Jun-2019 Intellasia | Nikkei | 6:00 AM Print This Post

Hong Kong shares rose for the first time in six days on Wednesday after the US Federal Reserve indicated the possibility of monetary easing to help weather economic headwinds.

The Hang Seng Index climbed 0.5 percent to 26,895.44 after falling 2.3 percent over the past five trading days. Social media and gaming major Tencent Holdings climbed 1.2%. Pan-Asia insurer AIA Group added 2.2%. The two heavyweights contributed to more than half of the gauge’s gains by points.

Pork producer WH Group, which shed 24.1 percent in May amid escalating Sino-American trade tensions, added 3.7%. Sunny Optical Technology Group rose 2.3%. The stock had slumped 30.1 percent last month after its client Huawei Technologies was added to a list of companies that would require government approval to buy components and technology from American companies.

Chinese drugmakers extended losses, with Sino Biopharmaceutical slumping 8.4 percent and CSPC Pharmaceutical Group declining 4.8%. Beijing had on Tuesday included the companies’ units on a list of 77 pharmaceutical companies the government plans to audit to improve the nation’s “medical security” systems.

Financial services company Jefferies said the inspection is negative for market sentiment toward drugmakers and believes it will “deepen concerns” about price cuts.

The Dow Jones Industrial Average added 2.1 percent overnight after Fed Chair Jerome Powell said at a conference that the central bank is “closely monitoring the implications” of trade dispute developments between the US and China, Mexico and other nations, and “will act as appropriate” to sustain economic growth.

“The confirmation of a potential precautionary rate cut in the second half is good for risky assets, including equities,” said Ricky Huang, an analyst at Luk Fook Financial Services. “The Hang Seng Index is due for a short term rebound,” and Powell’s remarks serve as a “catalyst.”

The Fed raised rates four times in 2018 and had earlier signaled the possibility of more rate increases this year.

Huang expects the “technical” rebound to last a few days, but said it was likely only a “short-term relief” as the medium-term outlook for the Chinese economy and equities remains weak.

In the mainland, the Shanghai Composite Index ended little changed after rising as much as 0.9 percent intraday, while the yuan traded onshore fell 0.1 percent against the dollar to 6.9107. The International Monetary Fund on Wednesday cut its growth outlook for China in 2019 to 6.2 percent from 6.3%, citing uncertainty around Sino-American trade tensions. In April, the IMF had raised China’s growth outlook for the year to 6.3 percent from 6.2%, citing improved outlook for trade relations between the two nations.

Solar power company GCL-Poly Energy Holdings jumped 7.4 percent in Hong Kong after agreeing to sell a 51 percent stake in its unit GCL New Energy to China Hua Neng Group Hong Kong, a unit of China Huaneng Group. GCL New Energy surged 18%.

Mainland developers China Evergrande Group and China Vanke added 2 percent each after reporting increases in May contracted sales.

Liquid crystal display products maker Truly International Holdings rose 1.8 percent after reporting a 16.9 percent increase in net consolidated turnover for May.


Category: Hong Kong

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