Chinese, Hong Kong Stocks Resume Slide as Tariff Threat Builds

(Bloomberg) -- Hong Kong stocks tumbled the most since June and equities in mainland China also weakened after a brief rebound Tuesday, rattled by a possible escalation in the U.S. trade war and wider turmoil in emerging markets.

Tencent Holdings Ltd. was the biggest drag on the Hang Seng Index, which fell 2.6 percent, though all 50 companies on the benchmark declined. The Shanghai Composite Index closed down 1.7 percent, as foreign investors dumped 3.1 billion yuan of mainland stocks via exchange links, the most since June 25. The yuan rose 0.1 percent onshore to 6.8368 per dollar as of 4:48 p.m. local time.

Investors are waiting to see if the U.S. goes ahead with tariffs on another $200 billion of Chinese goods, which would mark a significant escalation in a trade dispute that has dogged the country’s equity market for much of this year. People familiar with the matter said President Donald Trump could press ahead with the levies straight after a public-comment period concludes on Thursday.

“The market has been sluggish, with any rebound followed by immediate profit-taking,” said Toni Ho, an analyst with Rhb Osk Securities Hong Kong Ltd. “Uncertainty remains as investors focus on whether the U.S. will implement tariffs on $200 billion-worth of Chinese goods. Investors would prefer short-term trades amid cautious sentiment.”

Bloomberg reported Wednesday that China’s central bank drained money from the short-term money market in August and added hundreds of billions of yuan via repurchase agreements and increasing medium-term lending, according to people familiar with the matter. Such measures would be aimed at complementing efforts to support lending to the real economy.

Worst Performers

Concern over a slowdown in the domestic economy and a weakening yuan have also contributed to wiping about $2.4 trillion from China’s stock market since January. The Hang Seng Index has tumbled 18 percent in a little over seven months, with Tencent -- still a favorite among investors -- crashing 31 percent amid earnings and regulatory uncertainty. Citigroup Inc. has now lowered its revenue estimates for the Chinese Internet giant.

Automakers were among the worst performers Wednesday. Great Wall Motor Co. slid 5 percent, the worst performer on the Hang Seng China Enterprises Index, on concern over the impact of its price cuts and a slowdown in SUV sales. Dongfeng Motor Group Co. and BYD Co. lost more than 3 percent.

Property developers also fell. China Vanke Co. dropped 4.1 percent and Country Garden Holdings Co. slid 4.3 percent in Hong Kong, while Poly Real Estate Group Co. was the hardest hit on the Shanghai property gauge, retreating 4.2 percent. Rhb’s Ho said investors may be taking profit as developers climbed late last month after positive first-half earnings.

More Comments:

• “The trade issue between China and the U.S. is still the major factor affecting the market,” said Sam Chi Yung, a Hong Kong based strategist with South China Financial Holdings Ltd.
• Tech shares are weak due to earnings concerns: Sam
• 27,500 is an important supporting level for the Hang Seng Index: Sam

Index Moves:

• Hang Seng Index closes at 27,244 points
  • Tencent drops 4.1 percent, Sunny Optical Technology Group Co. slides 6.4 percent
• Hang Seng China Enterprises Index falls 2.3 percent
• Shanghai Composite closes at 2,704 points; ChiNext gauge declines 1.7 percent

News:

• Tencent 3Q Gaming Sales Estimates Still Too High, Citigroup Says
• Tencent Block Trade of 450,000 Shares Crosses at 2.24% Discount
• Telecom Stocks Fall as China Tower Slumps to Record: Asia Movers
• Worst May Be to Come for China Automakers as Profits Squeezed
• Great Wall Falls as Morgan Stanley Cuts Targets on Sales Concern
• PBOC Said to Have Adjusted Liquidity as Part of Economic Support

To contact Bloomberg News staff for this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net;Amanda Wang in Shanghai at twang234@bloomberg.net

To contact the editor responsible for this story: Will Davies at wdavies13@bloomberg.net

©2018 Bloomberg L.P.

With assistance from Editorial Board