Hong Kong stocks plunge as trade war escalates and protests compound growth concerns
- Hang Seng had plunged over 3 per cent early in the day, but narrowed its losses at the close
- Declines in China indexes came as the onshore yuan slipped to an 11-year low
The Hang Seng Index closed 1.9 per cent lower, weighed down by a ramp-up in the US-China trade war and weekend demonstrations in which Hong Kong police for the first time used water cannons to try to disperse protesters.
The drops in China were milder. The CSI 300 index, which tracks stocks listed in both Shanghai and Shenzhen, fell 1.4 per cent on Monday, to 3,765.91. The declines came amid a weakening Chinese currency, which saw the onshore yuan drop to an 11-year low of 7.15 per dollar in early trade.
The losses in the Hang Seng Index, which closed at 25,680.33, had narrowed at the close, after the benchmark gauge plunged by over 3 per cent within minutes of the market opening. The declines were seen almost across the board.
“There are a lot of uncertainties that are weighing on the Hong Kong market,” said Linus Yip, chief strategist at First Shanghai Securities.
The weakening Hong Kong economy, damaged by increasingly violent protests that started in June, means listed companies whose business is primarily focused on the city will continue to face pressure, he added.
Link Reit, which invests in Hong Kong-based retail properties, fell 2.4 per cent to HK$89.8. New World Development, a major Hong Kong developer, dropped 3 per cent to HK$9.84.
With the protests getting more violent by the week – the city’s policy force for the first time fired a live round at the weekend in an attempt to dissipate violent protestors – the prospects of a quick resolution remain distant. Financial Secretary Paul Chan earlier this month warned of a possible recession that could emerge in the current quarter.
Driving the Hang Seng down were index heavyweights Tencent, which fell 2.5 per cent to HK$326 and insurer AIA, which was down 2.9 per cent at HK$75.5.
WH Group, the world’s biggest pork producer, was the biggest loser, falling 6.4 per cent to HK$6.14, after Beijing said on Friday it would impose tariffs of as much as 10 per cent on US$75 billion worth of American products, including pork.
“It’s nearly all on the trade war now,” said Alan Li, portfolio manager at Atta Capital. “If China and the US don’t do anything to calm the market down, the HSI is likely to break 25,000 again early this week.”
The Shanghai Composite Index closed down 1.2 per cent at 2,863.57, the biggest decline since August 6.
Leading the index down were China Merchant Bank, which lost 3.5 per cent to close at 35 yuan, and Ping An Insurance, down 2.7 per cent at 87.5 yuan.
Selective consumer stocks also fell, with liquor distiller Kweichow Moutai down 2.4 per cent at 1,102.95 yuan. Its smaller Shenzhen-listed counterpart, Wuliangye Yibin, lost 2.1 per cent to 127.42 yuan.
Over the weekend, US President Donald Trump said the US would increase tariffs on almost all Chinese imports, raising duties to 30 per cent from 25 per cent on US$250 billion worth of goods on October 1. For another US$300 billion of Chinese goods, tariffs will increase to 15 per cent from 10 per cent, starting September 1.
Bucking today’s downward trend were gold-mining firms as investors switched money into safe-haven stocks. Shandong Gold Mining rose 4.7 per cent to 38.1 yuan, and Zhongjin Gold climbed 2.6 per cent to 9.83 yuan.
Analysts said the Shanghai Composite is likely to hover around the 2,800 level early this week.
