New blow for HSI as potential US stocks ban sparks fears

Top News | Avery Chen and Karen Ng 28 Jul 2021

The Hang Seng Index has become the worst-performing benchmark in the world yesterday amid market speculation that the United States will limit companies investing in China and Hong Kong.

That was a further blow to the local bourse, which has tumbled more than 10 percent in three trading days amid Beijing's ongoing regulatory crackdown.

The HSI plunged 1,105.89 points to 25,086.43 yesterday, dragged down by major tech companies.

Daily turnover surged to a record HK$360.7 billion. Mainland investors sold a net HK$1.28 billion Hong Kong shares through the stock connect, while total transaction value by mainland funds remained at around 14 percent of total turnover.

Traders started to dump Chinese equities and bonds yesterday afternoon amid industry talk suggesting that the White House may restrict investment in China and Hong Kong, according to Bloomberg.

The HSI once dived more than 1,400 points at around 3pm.

The report cited Li Kunkun, a trader from Guoyuan Securities, who said the rumors sparked fears of a large-scale foreign capital outflow from Chinese stock and bond markets.

Both foreign and domestic investors are worried about the simmering Sino-US tensions despite the high-level talks in Tianjin.

Panic selling continued in the mainland, with major Shanghai and Shenzhen gauges slumping 2 to 4 percent. Onshore yuan dropped 213 basis points to 6.504 per US dollar, a three-month low. The yield of China's 10-year government bond rose to 2.94 percent, the highest in a year, according to Bloomberg.

In Hong Kong, technology companies continued to free fall. The Hang Seng Tech Index saw the biggest decline since its debut a year ago, slumping 7.97 percent to 6,249.65.

Meituan slumped 17.66 percent and Alibaba dropped 6.35 percent after Chinese regulators launched new rules that ask food-delivery platforms to guarantee workers' minimum pay. They operate China's two dominant food-delivery platforms.

Tencent fell 8.98 percent, fell 9.43 percent and Baidu declined 7.31 percent.

Catherine Wood's ARK Innovation ETF has offloaded Tencent's shares and other Chinese companies. The fund's investment in Chinese companies total 0.32 percent, down from 8 percent in February.

In the past few weeks, Beijing's crackdown has extended to education, technology, food delivery, property and overseas listings.

Tencent's WeChat suspended the registration of new users to early August because it is upgrading the security technology to align with relevant laws and regulations. Jack Ma Yun's Ant Group said it had removed over 60 marketing activities that alleged irregularities from its Alipay in the first half.

Investors turned to local companies, carmakers, banking, and semiconductor sectors. State-owned financial conglomerate CITIC rose 2.37 percent, the best performer among blue-chip stocks, while UK lender HSBC was up 1.77 percent.

Andrew Wong, chairman of Anli Securities, believed a massive amount of margin calls further struck the Hong Kong market yesterday since many sales were observed especially near the market closing. However, Wong said many stocks rebounded afterward and he expects a pick-up soon.

Everbright Sun Hung Kai Securities strategist Kenny Ng Lai-yin said the record-high turnover showed weak investor confidence.

Ng predicted that the HSI would bottom out in the coming two days, with a slight rebound to around 25,000 points.

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