HSI slide deepens on trade woes

Business | Reuters and Tereza Cai 24 May 2019

The Hang Seng Index fell by 438 points to the lowest level in nearly four months at 27,267 points, led by index heavyweight Tencent (0700) which fell 3.83 percent to HK$326, as trade tensions intensified.

The whole day turnover on the main board was HK$99 billion.

Technology stocks were under pressure. Phone elements supplier AAC Technologies (2018) sank 6.36 percent to HK$41.25, and Sunny Optical Technology (2382) plunged 7.68 percent to HK$67.90. They were the two largest percentage losers among blue-chip stocks.

Pharmaceutical stocks slumped as Sino Biopharmaceutical (1177) fell 4.94 percent to HK$7.32, and CSPC Pharmaceutical (1093) tumbled 5.56 percent to HK$12.90.

SZSE Component Index fell 2.56 percent to 8,809 points in Shenzhen, and SSE Composite Index dropped 1.36 percent to 2,852 points.

The onshore yuan fell to a six-month low at 6.919 per US dollar, down 150 basis points, as a result of the escalating Sino-US trade war and the strong greenback.

Meanwhile, China has ample policy tools to cope with yuan fluctuations and is able to keep the currency basically stable, Liu Guoqiang, a vice central bank governor, said in remarks published yesterday.

China's foreign exchange market remained steady, despite some overshooting in the yuan exchange rate, Liu was quoted as saying by Financial News, a newspaper run by the central bank.

Liu also said China's foreign exchange reserves remain ample, while its macro leverage ratio is basically stable and fiscal and financial risks are under control.

Elsewhere, the Bank of Singapore said it believes currency depreciation is less likely to be a tool for China as a stimulus to boost the economy, as its exports have excelled. The bank expects the yuan to settle at about 6.8 against the US dollar, said Louisa Fok, the bank's China equity strategist.

She believes that both Hong Kong property stocks and Chinese offshore property stocks are good options to buy, as they are expected to offer sustainable dividend cash flow to investors.

She added that the likelihood of China and the United States reaching a deal before the end of June is low.

Also, the IT hardware industry might face pressure in the second half because of trade tensions.

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