Bank of Communications, HSBC weigh on Hang Seng Index as global coronavirus concerns once again come to the fore

·4-min read

Hong Kong markets retreated on Tuesday as investors were weighed down by concerns over a resurgence of the global coronavirus pandemic.

The Hang Seng Index rose by as much as 0.5 per cent in early trading, before ending the day 0.9 per cent lower at 23,275.53. It had climbed 1 per cent on Monday for its best day since August 24, after recording its steepest weekly loss since March last week.

The worldwide death toll from the coronavirus topped 1 million on Tuesday, as Europe faced another surge in cases leading to stricter curbs. The US accounted for around 205,000 deaths, or one out of five worldwide, adding to worries that there could be a further increase in infections as winter approaches.

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The grim milestone has put the markets on edge about the instability of economic recovery, said Stanley Chan, director of research at Emperor Securities.

“The markets are worried that if there is another outbreak, some places may need to further tighten restrictions which would impact economic recovery,” said Chan. “Stocks related to the banking sector have been under pressure recently. The operating outlook for the banking industry is very much tied to the overall situation of the economy, which is not doing so well. Sentiment is weak for both international banks and mainland banks.”

Banking stocks led the declines in Hong Kong, with Bank of Communications falling 4.2 per cent, while Hang Seng Bank declined 3.2 per cent. ICBC dropped 1.5 per cent, while China Merchants Bank plunged 6 per cent.

HSBC also retreated 2.6 per cent. It surged 7.8 per cent on Monday after China’s Ping An Insurance Group raised its stake in Hong Kong’s largest currency issuing bank, saying that HSBC was a long-term investment. The bank’s share price had fallen to a 25-year low last week after media reports that it and other banks processed trillions of dollars in money transfers despite concerns about potential criminal activity.

HSBC shares fell on Tuesday after rising to a 10-year intraday high in the previous session. Photo: Sam Tsang
HSBC shares fell on Tuesday after rising to a 10-year intraday high in the previous session. Photo: Sam Tsang

Meanwhile, China markets got a boost from further signs of economic recovery. The CSI300 index that tracks performances on both the Shanghai and Shenzhen markets gained 0.2 per cent to 4,591.80. The Shanghai Composite Index also gained 0.2 per cent to 3,224.36.

“Earnings in China’s colossal production and operations engines provided further evidence of a robust economic comeback in the mega economic power. The data augurs well for the China growth story,” said Stephen Innes, chief global markets strategist at AxiCorp. He however added that “as global economies attempt to restart, news flow indicates the number of Covid cases is rising”.

Chinese aircraft turbine manufacturer AECC Aviation Power led gains on the CSI300 with a 6.4 per cent increase.

Four stocks traded for the first time today in Hong Kong, while two made their debuts in Shanghai.

ZTO Express, one of China’s biggest courier delivery services company, rose 9.2 per cent to HK$238 from its offer price of HK$218. Neusoft Education Technology, which provides online education in China, was little changed from its offer price of HK$6.22. Baozun, a Shanghai-based provider of e-commerce solutions to online vendors, increased 1.3 per cent to HK$84 from its offer price of HK$82.90. Skymission Group, an engineering subcontractor based in the New Territories of Hong Kong, more than doubled to HK$1 from its IPO price of 35 Hong Kong cents.

Shanghai Lily & Beauty Cosmetics, an online marketing company that provides its services throughout China, rose 44 per cent to 17.61 yuan from its offer price of 12.23 yuan. Zhejiang Changhua Auto Parts, which makes stamping parts and other components for vehicles, soared 44 per cent to 14 yuan from its IPO price of 9.72 yuan on the Shanghai exchange.

Other markets in Asia were mixed. Japan’s Nikkei 225 rose 0.1 per cent. South Korea’s Kospi gained 0.9 per cent. Australia’s S&P/ASX 200 was little changed, while Singapore’s FTSE Straits Times Index declined 0.3 per cent.

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