Hong Kong Shares Near One-Year Low As Yuan Retreats

August 15, 2018

NewsStandOnline.Net (15-August-2018): Hong Kong stocks dropped on today, nearing a one-year low, as weak mainland Chinese equities and yuan weighed on sentiment and investors turned cautious ahead of Tencent Holdings’ earnings.

The Hang Seng Index lost 1.6% to 27,323.59, a closing level not seen since late August in 2017. Tencent slid 3.6% ahead of its first-half results announcement, expected later in the day.

One government department has made game registration procedures more stringent while another has not granted licenses for about four months, the report said. Tencent, the most valuable stock listed in Hong Kong, shed 3.4% yesterday after it pulled a recently-launched online game.

The Sino-American trade war, rising U.S. borrowing costs, and more recently a plunge in the Turkish lira, have all added to worries about a flight of capital from Asia, sending regional currencies lower. The yuan lost 0.3% to 6.9026 against the dollar on today, its lowest level in more than 15 months.

Meanwhile, the Hong Kong Monetary Authority, the city’s de facto central bank, reportedly intervened to support the local currency earlier today after it hit the 7.85 level against the U.S. dollar, the weaker end of its 7.75-7.85 trading band. It was more recently at 7.8499.

Hong Kong Shares Slide As US-China Trade War Begins

Ben Kwong, head of research at KGI Asia in Hong Kong, said investors were worried about capital outflows and that the yuan’s decline could affect company profits.

“Don’t buy things for now,” he said. “Cash is king. The correction is not over yet.”  Kwong said that Tencent’s results were not expected to provide a positive surprise. “In general, people did expect this to be a tough quarter,” he added.

In the mainland, the Shanghai Composite and its Shenzhen counterpart each fell 2.1%.  Pork producer WH Group jumped 8.2% in Hong Kong after saying profit in the first half of the year rose 13.2% to $557 million, as its revenue increased 4.8%.

Diversified conglomerate Wheelock declined 1.5% despite reporting a 38% increase in first-half net profit to 8.60 billion Hong Kong dollars ($1.10 billion).

Chinese airlines retreated amid the broad market declines despite data showing they flew more passengers last month.  Air China, which reported an 8.8% increase in July passengers, declined 3.9%, while China Southern Airlines tumbled 8.6%, although the number of passengers it carried last month rose 11.4%.