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Thursday, June 13, 2019, 01:15
Protests, higher rates spark stocks rout
By Dai Kaiyi
Thursday, June 13, 2019, 01:15 By Dai Kaiyi

Hong Kong stocks tumbled on Wednesday as investor sentiment soured over a host of factors, including a protest near the city’s central business district against extradition law amendments, surging interbank interest rates and an overnight retreat in major US equity indices.

The benchmark Hang Seng Index sank 1.73 percent, or 480.8 points, to close at 27,308.4 points.

The market slump on Wednesday would not have much of an impact in the long term.

Kwok Sze-chi

executive director 

Bright Smart Securities

Kwok Sze-chi, executive director of Bright Smart Securities, said the stock market’s bullish momentum over the past four days, which drove the HSI to high as 27,857 on Tuesday, had not been based on positive fundamentals.

Hong Kong developer Goldin Financial Holdings revealed on Tuesday said it had decided to walk away from a land deal at the Kai Tak development area in Kowloon East and forfeit a HK$25-million deposit, citing economic uncertainties.

Kwok believed that Goldin dropped the bid partly out of worries over a potential lack of upcoming funding for the deal, for which the developer is expected to raise at least HK$11 billion.

The move triggered a broader sell-off of real-estate stocks in the local equity market, further dampening investor appetite.

Technology stocks also headed south against the backdrop of the escalating Sino-US trade dispute.

Sunny Optical Technology and AAC Technologies Holdings were down 6.05 percent and 3.44 percent, respectively, while tech giant Tencent Holdings slipped 2.09 percent at the close of trading.

Kwok believed, however, the market slump on Wednesday would not have much of an impact in the long term.

Linus Yip Sheung-chi, chief strategist at First Shanghai Securities, agreed that the retreat should be seen as a consolidation instead of a downtrend momentum.

He noted that the trading volume stood at HK$76.9 billion on Wednesday, dwarfed by those in previous trading days of more than HK$90 billion, indicating the sell-off pressure had come under control.

Wednesday’s protest against the extradition law changes heightened demand for cash, pushing up the Hong Kong Interbank Offered Rate, or HIBOR, with its one-month and two-month tenors touching their highest levels since late 2008.

In the long run, the city’s market is expected to shrug off the climb in HIBOR as it eventually would be in sync with the movement of US interest-rates, which are widely anticipated to go downward.

Kwok said the anticipation of a rate cut by the US Federal Reserve would not be much of an impetus for market sentiment in Hong Kong, adding that following the historical nine interest rate cuts by the US Federal Reserve, Hong Kong had followed suit only once.

More benign, perhaps, is that the Hong Kong dollar has rallied alongside the uptick of HIBOR to as much as 0.12 percent against the greenback -- its strongest level since late last year.

Yip said the increase in HIBOR could help the Hong Kong currency find a firmer footing amid current market uncertainties.


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