Hong Kong markets gained on Wednesday but reported its first monthly decline since May, as deteriorating US-China relations ahead of the US presidential elections roiled the markets despite signs of economy recovery from China.
The Hang Seng Index ended trading on Wednesday with a 0.8 per cent gain to 23,459.05, paring an earlier 2.2 per cent rally in early trading. The benchmark completed the month with a 6.8 per cent drop, bringing the loss this year to 17.2 per cent.
Heightened US-China tensions have roiled the markets over the past month, as the Trump administration moved to impose restrictions on Chinese semiconductor producer SMIC and threatened bans on popular Chinese apps TikTok and WeChat.
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SMIC gained 2.4 per cent on Wednesday, trimming the decline this month to 27.2 per cent. Benchmark heavyweight Tencent, the owner of WeChat, gained 1.2 per cent to HK$511.50, unable to reverse a 3.6 per cent loss in September.
“US-China relations still remain under very intense conditions,” said Louis Tse Ming-kwong, managing director of VC Asset Management. He advised extra caution going forward as the US presidential elections neared, and that investors should expect volatility in the markets, particularly in tech stocks priced at high levels.
Markets in Hong Kong will be closed for the rest of the week for the National Day and Mid-Autumn Festival holidays. While Hong Kong will resume trading on Monday, markets in China will reopen on October 9.
Both China’s official manufacturing and non-manufacturing indices showed positive economic activity for seven consecutive months, according to official reports. China’s official manufacturing purchasing managers’ index (PMI) stood at 51.5 in September, above the reading of 51 in August and better than median estimates of 51.3 in a Bloomberg survey. Any reading above 50.0 signifies growth.
The official non-manufacturing PMI, which measures sentiment in the services and construction sectors, stood at 55.9 in September, above the reading of 55.2 for August and median expectations by Bloomberg of a decline to 54.7.
“The strong recovery in the second quarter relieves pressure on credit easing, and China’s monetary policy has shifted from large-scale liquidity injection to more targeted instruments,” said Xiao Chunxu, economist at Moody’s Analytics in a note.
“Loan support and further repayment extensions to small and medium-sized enterprises help firms stay afloat in the crisis but raise default risk when the grace period ends,” said Xiao.
China’s economic recovery “has picked up pace with supply and both domestic as well as overseas demand improving,” said Stephen Innes, chief global markets strategist at AxiCorp. “In the near future, however, great uncertainties remain about the overseas pandemic and the US election.”
The first debate between President Donald Trump and Democractic challenger Joe Biden saw them sparring on six topics, including Covid-19, the US economy and “the Trump and Biden records”.
“The extent to which the debate matters for markets is whether ‘undecideds’ are swayed either way. Polls in the comings days could provide more colour on any movement,” said Innes.
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In Hong Kong, China Evergrande Group, the nation’s biggest developer by sales, soared 19.4 per cent to HK$19.70 after it unveiled steps to avert a 130 billion yuan (US$19.1 billion) cash crunch in a late exchange filing on Tuesday. The company said most investors owning 36.5 per cent in its key unit called Hengda Real Estate have agreed to drop a repayment option in a much-delayed Shenzhen deal, and would maintain their holdings for an undisclosed period of time.
The stock is still down 8.8 per cent for the year, over concerns about its debt load.
Other property developers also rose, with Chinese Resources Land leading gains on the Hang Seng Index with a 5.9 per cent increase. New World Development rose 1.8 per cent, while Henderson Land added 2.5 per cent.
Hong Kong bourse operator HKEX gained 0.8 per cent to HK$361.80. Charles Li Xiaojia announced he would bring forward his retirement and step down as the head of Hong Kong Exchanges and Clearing on December 31, 10 months before his contract expires in a surprise announcement on Tuesday.
Li’s right-hand man, Calvin Tai, will take his place on an interim basis from January 1, while the search continues for a permanent replacement.
Shares of Alibaba Group Holding, the world’s largest e-commerce platform and owner of this newspaper, rose 3.8 per cent to HK$275.60. Alibaba’s cloud computing business is expected to turn profitable within the financial year ending in April 2021, while its Cainiao logistics network is expected to generate positive operating cash flow in the same period, the company’s chief financial officer Maggie Wu said in a webinar for Alibaba investors on Wednesday.
The CSI300 index that tracks performances on both the Shanghai and Shenzhen markets gained as much as 0.9 per cent before ending the day with a tiny loss of 0.1 per cent to 4,587.40. It posted a monthly loss of 4.8 per cent, and is up 12 per cent for the year.
Chinese traders have taken their money out of the markets to enjoy the long holiday, said VC Asset’s Tse.
More from South China Morning Post:
- Bank of Communications, HSBC weigh on Hang Seng Index as global coronavirus concerns once again come to the fore
- Hong Kong’s Hang Seng Index has best day in a month driven by gains in HSBC, China economic data
- Hong Kong’s Hang Seng Index posts biggest weekly decline since March on growth and pandemic concerns
- China Evergrande pre-empts US$19 billion cash crunch as investors drop repayment option in Shenzhen reorganisation plan
- China Evergrande faces possible snag in land deal as Shenzhen partner calls for care, more discussion on reorganisation plan
This article Hong Kong stocks end month in red amid US-China tensions despite signs of China economic recovery first appeared on South China Morning Post