Stocks, yuan fall over china worries

Staff reporter and agencies

Hong Kong stocks and yuan fell as the sentiment on expected US interest rate cuts has nearly been digested, alongside a deepening concern about China's economic uncertainty.

The Hang Seng Index sank 297 points, or 1.65 percent, to close at 17,691 points yesterday, dragged by tech shares and property developers. The Shanghai Composite Index fell 1.1 percent.

Tech giants Alibaba (9988) dropped 2.4 percent and Tencent (0700) dipped 1.1 percent.

Local developer New World Development (0017) dived 13 percent after it warned of a net loss of up to HK$20 billion for the year ending in June. Other Hong Kong developers also fell, with Sun Hung Kai Properties (0016) down 2.5 percent.

Mainland developers also saw a selloff, with China Vanke (2202) losing 5.8 percent yesterday in its biggest decline in about six weeks after posting the first loss in two decades.

Meanwhile, the city's bourse launched weekly options yesterday on the Hang Seng Tech Index, which tracks stocks including Alibaba and JD.com (9618) that also trade in the US.

Hong Kong Exchanges & Clearing (0388) is following global peers in expanding its derivatives offerings in a bid to boost trading on a market that's been lagging in recent years. Trading of futures and options on HKEX has risen in each of the past three years, with the number of total contracts outstanding now at a record of 14.3 million.

"This should help lift the overall market liquidity," said Eugene Hsiao, head of China equity strategy and China autos research at Macquarie Capital. The introduction of Hang Seng Tech weekly options is "positive in providing better price discovery, allowing investors more tactical flexibility to structure risk around events and shorter durations."

Elsewhere, UBS expects the MSCI China Index to see a nearly 10 percent increase in the next three to six months, largely thanks to rising corporate earnings.

In money markets, the onshore yuan closed 234 basis points lower at 7.1115 against the US dollar after China's central bank set the midpoint rate at a three-month high for the Chinese currency.

On commodities, oil prices extended losses from the end of last week on expectations of higher OPEC+ production from October while signs of sluggish demand in China and the United States raised concerns about future consumption growth.