Markets remain sluggish as investors look for progress in US-China trade talks

09-Jan-2019 Intellasia | South China Morning Post | 6:00 AM Print This Post

Hong Kong and mainland stocks were little moved in Tuesday morning trading as investors waited for more signs out of the high-stakes trade talks between the US and China.

By midday, the Hang Seng Index was up 0.27 per cent, or 70.12 points, to 25,905.82, while the Hang Seng China Enterprises Index edged up 0.18 per cent, or 18.36 points, to 10,142.21.

On the mainland, the Shanghai Composite dropped 0.2 per cent, or 5.14 points, to 2,527.95 and the CSI 300 lost 0.12 per cent, or 3.63 points, to 3,050.67.

Two days of talks between the US and China are under way in an attempt to come to a mutual deal on the tumultuous trade war. Though the talk talks were set to be at a “vice-ministerial” level, a surprise appearance was made by Chinese vice-Premier Liu He the top economic aide to President Xi Jinping, who has been in charge of trade discussions with Washington.

Chinese analysts said his attendance showed goodwill and Beijing’s commitment to reaching a deal.

US Commerce Secretary Wilbur Ross told CNBC that “there’s a very good chance that we’ll get a reasonable settlement that China can live with, that we can live with and that addresses all the key issues.”

Ross said such a deal could include the Chinese buying more American soybeans and liquefied natural gas, and agreements on issues like intellectual-property rights. But the outcome still hangs.

While US stocks rallied overnight on Monday on the news, leaving all three main equity indices higher, momentum failed to reach Hong Kong and China.

“Maybe [the meeting] gives a little sign that there is positive progress. However, I think it is a short term affect,” said Gordon Tsui, managing director of Hantec Pacific. “Basically the market does not have a good sentiment,” he said, predicting a narrow range of movement throughout the day for the Hang Seng.

“Not much is happening right now,” said Francis Lun, chief executive officer of Geo Securities. “The talks were already reflected in the market yesterday, so we are not expecting anything drastic to happen.”

Among blue chips, Geely Automobile Holdings, which owns Volvo Cars, continued to be hammered by a Morgan Stanley downgrade.

By midday on Tuesday, the stock had plummeted 11.63 per cent to HK$10.18, as car sales in China contracted last year for the first time since at least 1990, according to the China Association of Automobile Manufacturers. It is at its lowest level since May 5, 2017.

On January 3, the investment bank lowered its target price for Geely from HK$15 to HK$8, and its rating from “equal-weight” to “underweight”. It said it would turn positive on Geely if it solves its high inventory and maintains a healthy growth in sales.

By midday, the property subindex was the biggest gainer in the market, up 1.28 per cent.

CK Asset Holdings jumped 4.13 per cent to HK$63.00, New World Development rose 3.51 per cent to HK$11.22 and Hang Lung Properties gained 0.52 per cent to HK$15.42.

“The property sector will be better on expectation that the interest rate will stop rising,” noted Tsui, referring to earlier news that US Federal Reserve Chair Jerome Powell may pause rate increases.

China Evergrande, though, was down 1.79 per cent to HK$21.95 after the developer set its sales growth at the lowest in at least five years amid weakening demand. It is targeting 600 billion yuan (US$88 billion) in contracted sales, according to a filing to the Hong Kong stock exchange on Monday.

Money lending firm Noble Century Investment Holdings jolted up 20 per cent in morning trading to HK$1.14, its highest level since November 2016, after the company said it would acquire ChaoShang Financial Holding for HK$250 million (US$31.90 million), in an announcement after trading on Monday. By midday it was up 12.63 per cent to HK$1.07.

Apple suppliers seemed to continue to defy news of weaker demand for the iPhone maker’s products.

A loyal customer base and trust in Apple products is making investors take a longer term view and continue to buy into the smartphone maker’s suppliers, according to Tsui.

“I don’t think there will be an affect on the overall performance; in the long term it will go back to normal,” he said.

By midday, Apple supplier AAC Technologies Holdings was up 2.09 per cent to HK$41.55.

On the mainland, Foxconn Industrial Internet gained 0.26 per cent to 11.77 yuan, Lens Technology was up 2.15 per cent to 6.66 yuan and Luxshare Precision Industry rose 1.97 per cent to 13.98.

Apple has been hit by deteriorating relations between the US and China amid the trade war. Reports on Tuesday indicate the impact is travelling to other industry giants. South Korea’s Samsung Electronics missed quarterly profit and sales estimates for the period ended December.


Category: FinanceAsia

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