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Tencent, China Mobile Just Snatched Away Hong Kong's Bull Market

Tencent, China Mobile Just Snatched Away Hong Kong's Bull Market

(Bloomberg) -- Disappointing results from some of Hong Kong’s biggest stocks shattered hopes for a bull market this week.

The Hang Seng Index was down 0.2 percent as of 1:24 p.m. Friday, with Tencent Holdings Ltd., PetroChina Co. and China Mobile Ltd. weighing after their earnings left investors unimpressed. The benchmark was on the brink of entering a technical bull market Tuesday, ending about 0.1 percent below the milestone. A close at or above 29,502.64 would’ve made it official, capping a rally nearing $1 trillion in value since October.

The most intense earnings day since 2017 caused quite the headache. Investors had only just turned bullish on Hong Kong equities, encouraged by surging risk appetite in China, a dovish tilt in central-bank policy globally and heavyweight Tencent’s return from the doldrums. Despite the setback, the Hang Seng Index has still surged 12 percent this year.

The pace of gains has been nowhere near as fast as on the mainland, where returns remain better than in any other market in the world.

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Peg defense

It’s all about Hong Kong this week. The city’s currency is keeping FX traders busy -- especially early in the morning, when the de facto central bank has been intervening to protect the local dollar’s trading band. The currency got some reprieve from a dovish Federal Reserve, and is now trading near its strongest level in six weeks. The Fed’s signal that it will keep rates on hold this year surprised analysts and alleviated pressure on Hong Kong authorities.

Pegged to the U.S. dollar since 1983, Hong Kong’s currency has hit the weak end of its trading band repeatedly this month, spurring intervention that’s cost $1.5 billion. Local one-month borrowing costs climbed for a 12th straight day Friday to the highest since January. That’s helped narrow the gap between Hong Kong and U.S. borrowing costs, making shorting the local dollars less lucrative.

Chart of the week

After a wild March, the Shanghai Composite Index has turned the most volatile in three years relative to the Hang Seng, according to 30-day historical data.

Tencent, China Mobile Just Snatched Away Hong Kong's Bull Market

Catching up

Here’s what else caught our eye this week:

  • China’s equity rally will decelerate in the coming months.
  • Hong Kong’s most famous stock picker made an appearance.
  • How to calm an investor stampede into convertible bonds.
  • Bocom surprises by cutting its fundraising target by half.
  • Just as China’s banks raise a record amount of money.
  • China considers whether to take REITs for a trial spin.
  • Private equity snaps up Chinese commercial property.
  • Another sign that credit stress in China is deepening.
  • A star trader’s Chinese stock fund lures $10 billion in 10 hours.

--With assistance from Tian Chen.

To contact the reporter on this story: Sofia Horta e Costa in Hong Kong at shortaecosta@bloomberg.net

To contact the editors responsible for this story: Richard Frost at rfrost4@bloomberg.net, Magdalene Fung, Will Davies

©2019 Bloomberg L.P.