Hong Kong and China markets fall as investors await stimulus measures from annual parliamentary meetings

·3-min read

Hong Kong and China stocks fell after struggling for direction in the first half of trading, as investors eagerly anticipate the roll out of economic stimulus at the upcoming annual parliamentary session to boost the mainland’s coronavirus-battered economy, and rising US-China tensions.

The Hang Seng Index fell 0.5 per cent to 24,280.03, snapping a three-day rally this week. The Shanghai Composite Index lost 0.6 per cent to 2,867.92.

“Investors are trying to identify winners and losers ... as the Two Sessions will only affect the market in the short term,” said Alex Wong, director at Ample Finance Group, noting investors were shying away from Hong Kong companies as the outlook for the city’s economy remains weak.

Investors initially pushed stocks up after a tech-led rally overnight in the US, but sentiment turned cautious as the day progressed.

People’s Liberation Army (PLA) soldiers wearing protective face masks march past the entrance to the Forbidden City, in Beijing. China will hold the Chinese People’s Political Consultative Conference (CPPCC) on Thursday and the National People's Congress (NPC) on Friday. Photo: EPA-EFE
People’s Liberation Army (PLA) soldiers wearing protective face masks march past the entrance to the Forbidden City, in Beijing. China will hold the Chinese People’s Political Consultative Conference (CPPCC) on Thursday and the National People's Congress (NPC) on Friday. Photo: EPA-EFE

In Hong Kong, apparel maker Shenzhou International led the decline. The stock fell 3.8 per cent after Credit Suisse lowered its target price on expectation of a drop in orders. Index heavyweight Tencent fell 1.9 per cent. Chip maker SMIC plunged 7.3 per cent.

Bourse operator HKEX, which itself is listed on Hong Kong stock exchange, jumped 2 per cent on optimism that it could become a preferred listing destination for Chinese companies. The boost came after the US Senate passed legislation on Wednesday that could disqualify many mainland firms from listing shares on US stock exchanges without adhering to the security laws and auditing regulations.

US Senate’s bill to fence off Wall Street from Chinese companies may turn into a helping hand to Hong Kong stock exchange

“HKEX could become China’s Nasdaq,” Wong said. “The best solution for China is to drive tech companies like Tik Tok’s parent ByteDance back to Hong Kong.” He added that bringing four to five unicorns to the city would raise the exchange’s profile.

CanSino Biologics was also in the limelight today. The Chinese vaccine maker, which rose to an all-time high of HK$285.8 in intraday trading, eventually closed 13 per cent lower at HK$214.

Some traders said a series of large transactions may have triggered the sell-off, with at least 17 trades comprising more than 10,000 shares each changing hands in the afternoon, Bloomberg reported. Others cited profit-taking after this year’s surge of 385 per cent.

Mainland stocks were dragged down by tech companies on news that US regulators are open to making changes to close a possible loophole in a new rule aimed at curbing global chip sales to Huawei.

The Nasdaq-like tech board ChiNext shed 0.9 per cent. Shenzhen Fine Made Electronics Group plunged 8.8 per cent, while China Wafer Level CSP lost 8.3 per cent.

“Tech stocks have readjusted after previous relatively big gains for around two months,” said Wang Yi, chief strategist at Great Wall Securities. “Semiconductors are still under pressure from US restrictions on Huawei.”

The drop on the mainland was capped by gains in pharmaceutical and consumer stocks. Kweichow Moutai, the world’s most valuable alcohol maker, rose 1.1 per cent to close at a record-high of 1,366.1 yuan.

Additional reporting by Albert Han

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