HK stocks slide as January bull run triggers caution and CNOOC exits MSCI indices

23-Jan-2021 Intellasia | South China Moring Post | 6:02 AM Print This Post

Hong Kong stocks were headed for a second day of losses, as the market’s best start to a year since 1985 sent prices into the overbought zone. The worsening pandemic situation resulting in renewed lockdowns and tightened restrictions in China and overseas also hurt sentiment.

The Hang Seng Index slumped 1.5 per cent to 29,480.11 at 3.20pm local time, the biggest setback since a 2.1 per cent sell-off on November 30, according to Bloomberg data. The index had risen more than 10 per cent this year through Thursday when it surpassed the 30,000 level for the first time since May 2019, before pulling back at the close. CNOOC plunged after MSCI decided to delete it from some indices.

The Shanghai Composite Index dropped 0.4 per cent to 3,606.75, reducing the gain this week to 1.1 per cent.

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Hong Kong’s blue-chip benchmark index still logged a winning week with 3.2 per cent advance, and 8.3 per cent so far this month, amid record inflows of mainland cash through the southbound channels of the Stock Connect programme.

“The stocks have risen quite a lot recently, when it broke 30,000 points and investors reached their short-term goals, they tend to take profit at a high level,” said Linus Yip, chief strategist at First Shanghai Securities. “Although funds usually have long-term arrangement [in their new portfolio], the market still will have consolidation when they stopped buying [at a high price].”

Stocks retreated as the bull run encountered two immediate barriers. The surge this year has catapulted the market above 70 on the relative strength index, a technical threshold deemed as an “overbought” zone and typically signals a trend reversal.

Six of the top 20 index stocks including Tencent Holdings, Meituan and Hong Kong Exchanges & Clearing (HKEX) flashed those warning signals as of yesterday after prices hit their record-highs. The trio were still higher today after swinging between gains and losses.

CNOOC plunged 5.8 per cent to HK$7.78, the most since November 30, after index compiler MSCI decided to delete the stock from its global and China indices. The company is a unit of China’s third-largest oil explorer China National Offshore Oil Corp, one of the Chinese companies sanctioned by the Trump administration.

CNOOC is also one of the top buying targets of mainland mutual funds on the Stock Connect scheme, according to exchange data.

Xiaomi, like CNOOC a sanction target and a beneficiary of mainland fund buying this week, shed 3.6 per cent to HK$29.85. Alibaba, which owns the South China Morning Post, declined 3.3 per cent to HK$250.

Mainland funds have tempered their enthusiasm by scaling back net purchases of Hong Kong stocks on the southbound channels, according to stock exchange data. Net inflows eased to HK$16.3 billion (US$2.1 billion) on Thursday vs HK$20.3 billion on Wednesday and a record HK$26.3 billion on Tuesday.

Markets around the Asia-Pacific region weakened. The S&P/ASX 200 in Australia dropped 0.3 per cent and the Nikkei 225 eased 0.1 per cent. South Korea’s Kospi Index declined 0.4 per cent.

Concerns about Covid-19 infections remain high. China reported 94 new local cases on January 21, with outbreaks lingering in northern Hebei and Heilongjiang provinces. President Joe Biden, meanwhile, said the US could see another 100,000 fatalities over the next month.

New listings soared. In Shenzhen, Sinostar Cable more than tripled to 12.75 yuan, Sanyou Corp more than doubled to 58.97 yuan. Shanghai Hiuv New Materials also more than tripled to 232 yuan in Shanghai.


Category: Hong Kong

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