Hong Kong stocks end three-day winning streak before report signalling China slowdown risks

·2-min read

Hong Kong stocks dropped for the first time in four days as traders focused on a government report signalling China’s economic rebound may have faltered last quarter.

The Hang Seng Index fell 0.6 per cent to 27,787.46 at the close of Wednesday trading. The benchmark rallied 3 per cent in the previous three days after China’s central bank lowered banks’ reserve-requirement ratio (RRR). The Hang Seng Tech Index added 0.1 per cent for a fourth day of gains. The Shanghai Composite Index slid 1.1 per cent.

Trade linked to the new-energy sector waned, as stocks surrendered some of their advances earlier this week. Electric-vehicle makers BYD and Geely Automobile dropped more than 2 per cent and Xinyi Solar Holdings sank 4.7 per cent.

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Sentiment was cautious before the release of China’s second-quarter growth report on Thursday. The world’s second-largest economy probably grew 8 per cent, slowing from an 18.3 per cent expansion in the opening three months this year, according to the median of forecasts tracked by Bloomberg.

Some economists predicted below-projection performance, saying the unexpected cut in the reserve ratio with effect from July 15 indicated the need for policymakers to intervene and arrest a deeper slowdown.

“China sprang a surprise RRR cut on markets, which to my mind is a strong signal from Beijing that they are nervous about the fading [growth] momentum,” said Jeffrey Halley, an analyst at Oanda.

Other major markets in Asia were mixed after US stocks pulled back from record highs in overnight trading. Benchmark Treasuries also dropped after US inflation accelerated at the fastest pace since 2008, reviving concerns that the Federal Reserve will reduce its monetary support sooner than expected.

Among notable gainers, Wuxi Biologics surged 6.5 per cent to HK$139.80 after saying first-half profit probably increased by more than 135 per cent from a year earlier due to a recovery in production and an improvement in utilisation, among others.

China’s biggest parcel-delivery firm SF Holdings jumped 4.1 per cent to 67.30 yuan in Shenzhen after forecasting a return to profitability in the second quarter because of easing of capacity restraint and improved operating efficiency. Still, earnings for the first half probably slumped between 78 and 83 per cent from a year ago, it said in an exchange filing late Tuesday.

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