Date
23 October 2017
First Day Of Trading Of The Lunar New Year at The Hong Kong Stock Exchange (HKEx)

The Big Picture: MARKET JITTERS

Hong Kong stocks followed overseas peers when they resumed trading on Tuesday after the Lunar New Year holidays, closing with sharp losses as investor sentiment turned sour on weak US data, fresh concerns over emerging markets and worries about slowing Chinese factory activity.

The benchmark Hang Seng Index tumbled 637 points or 2.89 percent to finish at 21,397, its lowest level since mid-July. The Hang Seng China Enterprises Index, the main gauge for H shares, dived 3.14 percent to 9,509 points.

Most blue chips closed in the red. Lenovo (00992.HK) came under heavy selling pressure after announcing its purchase of Motorola Mobility from Google for US$2.91 billion. The counter slumped 16.4 percent, making it the worst-performing blue chip. 

Galaxy Entertainment (00027.HK) and Tencent (00700.HK) followed closely behind, both falling more than 6 percent. All Chinese lenders also saw notable declines.

Although there is no scientific evidence to support that the performance of the stock market on the first trading day after the Lunar New Year holidays will reflect the full year trend, the weak start in the Year of the Horse is likely to have a psychological impact on investor sentiment over the next few weeks.

Markets in Hong Kong and China will probably need to consolidate for some more time amid the shadow of the US tapering of quantitative easing measures. Also, the recent tightening of liquidity in the Chinese interbank market, together with the resumption of the initial public offering market on the mainland, may continue to exert pressure on the A-share markets, which will reopen Friday.

China says holiday supply abundant, prices stable

China’s consumer markets saw an abundant supply of products during the first four days of the Lunar New Year holiday, with prices generally stable, the Ministry of Commerce said on its website Tuesday. Retail markets in Chengdu posted 13 percent sales growth during the period compared with the previous year while 120 major commercial service companies in Beijing saw a 9.2 percent increase in sales in the three days to Feb. 2 from a year earlier. However, sales of high-end gifts and luxury catering fell sharply, the ministry said. Pork prices in 36 major cities were up 0.6 percent on Feb. 3 from Jan. 30, the Lunar New Year Eve. Beef prices rose 0.2 percent and average wholesale prices of 18 vegetables were up 0.1 percent.

Beijing scraps 1.2 mln ton Thai rice deal

China has scrapped a deal to buy 1.2 million tons of Thai rice, about 14 per cent of annual exports, because of a corruption probe into Bangkok’s troubled agricultural subsidies scheme, the Financial Times reported Tuesday. A Thai bank also pulled its support for the project, whose funding shortages have triggered protests from unpaid farmers, the report said. China withdrew from the rice deal because it lacks confidence to do business with Thailand, Commerce Minister Niwatthamrong Bunsongphaisan was quoted as saying. The move followed an anti-corruption investigation last month into a Thai subsidy scheme that is soaking up US$4 billion a year, the report said.

–Contact HKEJ at [email protected]

JP/AC/RC

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