Hong Kong stocks log worst week in three months as Middle East conflict reports batter sentiment, investors seek havens
- Gold and US Treasuries rally as investors sought safe haven assets. Stocks of gold and energy companies advance as bullion and oil prices vault.
- Japanese investment bank Nomura downgrades MSCI Hong Kong to ‘underweight’ from ‘neutral’ in its model portfolio
The Hang Seng Index lost 1 per cent to 16,224.14 on Friday, bringing the loss this week to 3 per cent. The Tech Index slipped 2.4 per cent, while the Shanghai Composite Index lost 0.3 per cent.
Risk appetite soured on Middle East tensions. Iran’s state media said the country had activated its air defence system after reports of explosions near the Iranian city of Isfahan. Oil prices soared taking Brent past the US$90 per barrel mark briefly.
“Recent reports of an Israeli aerial bombardment targeting a key nuclear facility in central Isfahan have sparked a significant shift out of risk assets and into safe-haven investments,” said Stephen Innes, a managing partner at SPI Asset Management.
Shares of upstream oil companies and gold producers were among gainers. CNOOC, China’s biggest offshore energy explorer, rose 2.1 per cent to HK$18.78 and Zhaojin Mining added 1.3 per cent to HK$12.92.
Adding to Hong Kong stocks’ miseries, Nomura downgraded the MSCI HK Index, which tracks the 30 markets heavyweights including AIA and HKEX, to underweight from neutral on Thursday in the Asia ex-Japan portfolio.
“Our call is largely driven by bottom-up views, as we struggle to find exciting single-stock ideas,” strategists including Chetan Seth said in a note. Large index stocks are lacking near-term catalysts, while domestic Hong Kong economy-focused stocks, such as utilities, property and banks, have weak growth prospects, they added.
The Hang Seng Index has lost 3 per cent so far this week, its worst performance since the week ended on January 19, as China’s cloudy economic outlook, Fed’s “higher for longer” rates projection and rising Middle East tensions soured risk appetite.
Asian markets fell across the board on the missile strike report. Japan’s Nikkei 225 Index tumbled 2.7 per cent, Korea’s Kospi lost 1.6 per cent while Australia’s S&P/ASX 200 declined 1 per cent.
