Hong Kong stocks see longest losing streak since 1997


Economic woes and escalating street protests have turned sentiment negative
Chief Investment Office06 Aug 2019
Photo credit: AFP Photo


CHINA & HONG KONG

Hong Kong equities are rapidly turning into a losing bet as economic woes and escalating street protests hammer sentiment.

The MSCI Hong Kong Index closed down 3.2% on Monday (5 August) in a ninth day of declines, matching the longest streak since the 1997 handover. Landlords, retail stocks, and casinos once again bore the brunt of the selling as protesters sought to shut down the city with a general strike. The sinking Chinese currency is not helping either, with its plunge past seven per dollar escalating concerns about the US-China trade war.

Hong Kong business confidence, already strained by the trade war, faces fresh challenges as the street clashes damp spending and deter tourists. The economy contracted more than expected last quarter from the previous three months, with retail sales plunging 6.7% in June from a year earlier, while an IHS Markit purchasing managers’ index fell to the lowest since 2009.

The Hong Kong dollar, which is linked to the greenback, weakened as much as 0.11% to 7.8354 Monday, its lowest since mid-June.

The imposition of new tariffs on Chinese goods by US President Donald Trump will likely only worsen the outlook for the former British colony. Even before that move, embattled Chief Executive Carrie Lam said she saw “no room for optimism” for the city’s economy this year as the trade war weighed on growth. Lam spoke to the press Monday for the first time in about two weeks, warning of a “very dangerous situation” as protesters moved to shut down the financial hub with a general strike and commute disruptions.

MTR Corporation, which has the best risk-adjusted return of any Hang Seng Index member this year, tumbled 3.4% Monday. Shares of the rail operator have lost around 13% since an 18 July record, as the anti-government protests shut underground stations and disrupted train services. Wynn Macau Ltd dropped 5.8%, while hotel operator Shangri-La Asia Ltd fell 5.2% to its lowest price since February 2017. – Bloomberg News.

The Hang Seng Index tumbled 2.85% to 26,151.32 and the Shanghai Composite Index declined 1.62% to 2,821.50.

 

REST OF ASIA

Investors may find safety in Philippine equities as trade tensions ravage most regional markets, analysts said, citing the positive outlook for economic and earnings growth.

Forecasts for economic growth exceeding 6% over the next two years, positive year-to-date earnings revisions, and room to ease borrowing costs can support the nation’s stocks in the second half of this year, even as the Philippine Stock Exchange Index pulls back from last month’s bull market territory, according to analysts.

A report today may show inflation in July was the slowest pace in two years, while one on Thursday (8 August) may show an acceleration in quarterly economic growth. The central bank is expected to cut borrowing costs by a quarter percentage point at its 8 August policy meeting.

Foreign investors have poured USD494m into Philippine equities this year through 2 August, after pulling out more than USD1b in 2018, the most in three years, according to data compiled by Bloomberg.

To be sure, China on Monday allowed the yuan to tumble to its weakest level in a decade against the US dollar in an escalation of the trade war. Tensions are likely to continue to roil financial markets and weigh on global economic growth, according to analysts. The Philippine Stock Exchange Index tumbled 3% Monday (5 August), the most since January 2016.

Financial firms also remain positive on Philippine stocks on expectations that rate cuts and government spending will boost earnings growth in the second half of this year. – Bloomberg News.

South Korea’s Kospi Index fell 1.63% to 1,915.34 early-Tuesday (6 August) morning. It lost 2.56% to 1,946.98 the previous session.

Shares in Sydney slipped on Monday morning with the S&P/ASX 200 Index losing 2.64% to 6,464.70 at the open. The index slid 1.90% to 6,640.30 in the previous session.

The Taiwan Stock Exchange Weighted Index weakened 1.19% to 10,423.41.


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