HK stock in torment as mainland traders exit, Beijing endorses national security law

30-May-2020 Intellasia | South China Morning Post | 6:02 AM Print This Post

Hong Kong stocks slipped in see-saw trading as mainland traders unwound positions amid widening US-China political rifts, with Beijing endorsing a proposal to impose a controversial security law for the city.

The Hang Seng Index dropped 0.7 per cent, or 168.6 points, to 23,132.76 at the close, trimming an intraday loss of as much as 2.2 per cent. The Shanghai Composite Index closed 0.3 per cent higher. Hong Kong’s currency and the yuan both strengthened against the US dollar.

The limp contrasted with more than 1 per cent rally in Japan and Australia, as global stocks continue to rebound from epic sell-offs. More businesses are reopening across Asia on optimism the pandemic is past its peak. Hong Kong’s stock market, however, continued to be hamstrung by rising political risks.

Delegates at the National People’s Congress endorsed a proposal for a security law in Hong Kong at the end of the annual legislative meeting. This could draw more international backlash. It follows the US decision on Wednesday to certify that Hong Kong has lost its autonomy from China.

“Whoever’s buying Hong Kong today has to take a longer term view, and whoever selling and shorting is taking a very short-term view,” said Khiem Do, head of Greater China investments in Hong Kong at Baring Asset Management. “That is the fight being waged on the Hong Kong market over the last few days.”

Some 33 of the 50 members in the Hang Seng Index declined, while 15 advanced. CSPC Pharmaceutical and Sino Biopharmaceutical were the biggest decliners, falling 10 per cent and 4.9 per cent respectively. CSPC declined on expectations prices of one of its major drugs will not be included in the bulk procurement by the Chinese government.

Tencent Holdings and HSBC were among the biggest drag on the Hang Seng Index, accounting for more than half of its loss. The Chinese social media juggernaut lost 2.8 per cent to HK$408.20 and HSBC shed 0.9 per cent to HK$37.

What to expect now US deems Hong Kong no longer ‘autonomous’

Mainland traders sold HK$1.5 billion (US$199.9 million) of Hong Kong shares through the Stock Connect programme on Thursday, the first single-day outflow in almost three weeks.

The US on Wednesday determined that Hong Kong is no longer suitably autonomous from China, a move that could lead to the suspension of the city’s preferential trade status. Hong Kong police arrested more than 360 people in protests against Beijing’s power grab.

The White House statement came after President Donald Trump said that he would do something soon in response to Beijing’s legal overreach in Hong Kong which is seen as throttling dissents in the city.

That has fuelled expectations about more punitive measures against Beijing, from higher trade tariffs, tougher investment rules and sanctions against officials and businesses. Still, the US is walking on a tightrope, with 1,200 American companies operating in the city, according to Baring’s Khiem Do.

In another move that will further strain the Sino-US ties, a court in Canada ruled against Meng Wanzhou, chief financial officer of Huawei Technologies, in her bid to strike out fraud charges and potential extradition to the US.


Category: Hong Kong

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