Hong Kong shares fall in morning session but mainland China stock markets bounce back
Originally published at the South China Morning Post on January 18, 2016.
Hong Kong’s stock market closed the morning session lower on Monday after US markets fell on Friday and crude oil hit new lows over the weekend on fears that America’s lifting of sanctions on Iran would flood an already oversupplied market.
However, mainland stocks rebounded from early morning losses to close the session higher.
The Hang Seng Index closed down 1.11 per cent or 216.01 points at 19,304.76, while the H-share index that tracks mainland companies listed in Hong Kong fell by 0.57 per cent or 47.01 points to finish the morning session at 8,189.27.
Kenny Tang Sing-hing, chief executive of Jun Yang Securities, said sentiment was sour because oil prices had not yet hit rock bottom and investors remained concerned about mainland China’s economy and currency.
“There should be some support at the 19,000 level even though the US market was not doing quite so well over the weekend,” Tang said. “I think the Hong Kong market has already accumulated a lot of losses, so maybe the downtrend will start to slow down because all the negative factors in the markets are already reflected in the share price.”
Among the most highly traded stocks, Tencent fell 0.95 per cent to HK$135.7, HSBC declined 2.94 per cent to HK$54.45, AIA slid 2.12 per cent to HK$41.55 and CNOOC shed 3.82 per cent to HK$6.79.
Mainland stocks finished higher after recovering from early losses in a choppy morning session, with the Shanghai Composite Index closing at 2,903.54, up 0.09 per cent or 2.57 points. The large-cap CSI 300 Index finished the morning trade at 3,123.61, up 0.16 per cent or 4.88 points.
The Shenzhen Composite closed at the morning session at 1,816.46, up 1.13 per cent or 20.33 points.The Nasdaq-style ChiNext Price Index gained 2.43 per cent or 51.39 points to 2,164.29.
Tang said that the mainland markets were volatile because investors were still waiting for government policies to be introduced, and China’s economic outlook remained unclear.
“I think the mainland market still lacks clear direction,” Tang said. “The chairman of the CSRC (China Securities Regulatory Commission) said that it will hit the market speculation, so maybe the market hopes that there may be some rebound.”
China’s fourth-quarter gross domestic product, retail sales and industrial production data is set to be released on Tuesday. Reuters reported over the weekend that the People’s Bank of China is preparing to increase the reserve requirement ratio for yuan deposits from January 25 to stem currency speculation.
“(China) won’t let the market crash because that would be too disastrous to them,” said Francis Lun, chief executive of GEO Securities. “With a slowing economy, the last thing they want to see is a falling stock market so they have to stabilise.”
The PBOC set the mid-price of the yuan against the US dollar at 6.5590, up by 47 basis points from Friday when it set the currency weaker by 21 basis points. It set the mid-price against the euro weaker by 305 basis points to 7.1702, weaker by 438 basis points against 100 yen at 5.6099, and 1,159 basis points stronger against the pound at 9.3707. The mainland currency is allowed to be traded in a range 2 per cent either side of the mid-price.
All three major US indices closed lower on Friday. The S&P 500 index ended down 2.16 per cent or 41.51 points to 1,880.33. The Dow Jones Industrial Average closed 2.39 per cent lower or 390.97 points to close at 15,988.08. The Nasdaq Composite finished down 2.74 per cent or 126.59 points to 4,488.42.