HK’s Hang Seng Index on track for biggest weekly decline since March on growth and pandemic concerns

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

Hong Kong’s stocks were heading for the biggest weekly loss in six months, as concerns lingered that a global recovery will falter amid the lack of a fresh stimulus package in the US and a spike in coronavirus cases in Europe.

The Hang Seng Index fell 0.2 per cent, or 48.93 points, to 23,262.14 at the noon break on Friday, extending the loss to 4.9 per cent for the week. The decline was the steepest for the five-day period since March.

The mainland’s Shanghai Composite Index dropped 0.2 per cent. The yuan strengthened 0.2 per cent against the US dollar after FTSE Russell said it will add China’s sovereign debt to its global bond benchmarks next year for the first time.

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Still, further declines in Hong Kong stocks may be limited as a technical indicator implies that the recent losses may be excessive. The 14-day relative strength index of the Hang Seng gauge fell to 27 on Thursday, below the threshold of 30 that signals to some technical traders that stocks are oversold and due for a rebound. The Hang Seng Index is valued at 12.4 times earnings, the lowest multiple among the world’s major markets, according to Bloomberg data.

Sentiment remained skittish despite the temporary easing of recent sell-offs in global markets. Major US stock benchmarks all ended higher in overnight trading, although they gave up most of the gains in a volatile session. The White House is still in a deadlock with Congress over a new fiscal stimulus package, and Europe has been roiled by a resurgence of Covid-19, with the UK and France reporting record-high daily new infections since the outbreak started.

“It has been a bumpy ride this week with investors worrying about the upcoming election, top-down concern over the US economic recovery, and doubts about the prospects for Congress to deliver more financial aid for struggling Americans,” said Stephen Innes, chief global market strategist at AxiCorp. “At this point in the recovery, a return to the Covid-19 abyss due to stricter lockdown measures is quite frankly something the global economy cannot afford.”

China Evergrande Group, the world’s most indebted property developer, slid 3 per cent to HK$14.76, extending a 5.6 per cent loss a day earlier, on concern that it will not be able to repay a debt of 130 billion yuan (US$19.1 billion) maturing in January. Short interest, or the bearish bets on the stock, jumped by the most in more than five weeks on Thursday, according to stock exchange data. Separately, the Shanghai exchange halted trading of Evergrande’s two bonds due to unusual price movements.

Ming Yuan Cloud Group Holdings, a developer of software for property companies, surged 82 per cent from its initial public offering price to HK$30 on the first day of trading.

Four mainland companies Shanghai Zhonggu Logistics, Guangzhou Ruoyuchen Tech, Elite Color Environmental Resources and Shaanxi Zhongtian Rocket Technology made their trading debuts on the Shanghai and Shenzhen exchanges. All the four stocks jumped by 44 per cent, the daily limit allowed for debutants on the main boards.


Category: Hong Kong

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