Hong Kong’s Stock Rebounds Keep Punishing Anyone Who Dares Buy
Hong Kong Stocks Drop With Yuan as U.S.-China Tensions Increase
(Bloomberg) -- The only certainty in Hong Kong’s stock market right now is that rebounds don’t last.
The Hang Seng Index fell 1.6% Thursday amid signs of a widening rift between the U.S. and China, with President Donald Trump expected to sign a bill supporting Hong Kong protesters. Losses in the city were among the worst in Asia, a painful reversal for investors who had chased its world-beating rally at the beginning of the week.
The lack of resilience in Hong Kong marks a departure from the start of 2019, where investors treated bad news as transitory and used declines as opportunities to buy the dip. Now, they’re shifting to sell the rally. That’s endangering this year’s gains, putting the Hang Seng Index at risk of posting its first back-to-back annual loss since 2002. It’s up just 2.4% for the year, down from 17% at its April high.
“If the bill becomes law, investors will be hesitant to take on the risk,” Hao Hong, head of research at Bocom International, said by phone. “There are too many moving parts, it’s very tricky. In the coming six months, the Hang Seng Index will be stuck in a range of 25,000 - 27,500.”
The U.S. bill is throwing another wrench into Hong Kong’s fourth-quarter stock performance. A weak yuan makes matters worse, as Hang Seng Index members get an average 64% of revenue from the mainland. Meanwhile, local firms are struggling as the city’s economy heads for a recession and retail sales plunge. Property stocks bore the brunt of the selloff, with a gauge of related firms dropping as much as 3%.
Wharf Real Estate Investment Co. and Hysan Development Co Ltd. declined at least 3.5%. Implied volatility in the Hang Seng Index jumped 5.5%, the most in a week. Elsewhere, Cosco Shipping Ports Ltd. lost as much as 6.6%.
Among other losers on Thursday, Ping An Healthcare and Technology Co. fell 12%, its biggest one-day loss on record, after a 20 million-share block trade.
Trading in two stocks was suspended. Artgo Holdings Ltd. plunged 98% after MSCI Inc. scrapped plans to add it to its suite of indexes because of concerns about investability. Kasen International Holdings Ltd. fell as much as 91% after being targeted by short seller Blue Orca Capital LLC.
--With assistance from Sofia Horta e Costa.
To contact the reporters on this story: Claire Che in Beijing at yche16@bloomberg.net;Elena Popina in Hong Kong at epopina@bloomberg.net
To contact the editors responsible for this story: Richard Frost at rfrost4@bloomberg.net, Sofia Horta e Costa, David Watkins
©2019 Bloomberg L.P.