Kong’s markets are under renewed pressure


Protestors swarmed the airport for a fourth day
Chief Investment Office13 Aug 2019
Photo credit: AFP Photo


CHINA & HONG KONG

Hong Kong’s financial markets are under renewed pressure after the city’s airport cancelled Monday’s (12 August) remaining flights, highlighting the economic fallout from increasingly violent protests.

Futures on the Hang Seng Index fell 1%, to more than 500 points below where the index closed. The benchmark had dipped 0.44% to 25,824.72 on Monday. The Hang Seng China Enterprises Index of Chinese firms has lost 16% since its April high, not far from entering a technical bear market.

The threat from the trade war and weeks of local unrest is already showing in the property market, as well as tourist numbers, hotel occupancy, and retail sales. A weak yuan is another cause for concern, as it will damp spending from mainland visitors and pressure earnings for firms that rely on China. Profits for members of the Hang Seng Index are forecast to drop the most since the global financial crisis this year, data compiled by Bloomberg show.

Shares of Cathay Pacific Airways Ltd(293.HK), Hong Kong’s main airline, tumbled to a 10-year low Monday as China barred its employees who supported the protests from flying to the mainland. Swire Properties Ltd(1972.HK) – which operates malls and hotels in the city – fell 5.4%, taking its losses since June 10 to 24%.

Mainland investors have made the most of the slump in Hong Kong-listed equities, purchasing stocks through exchange links every day this month. They bought a net USD289m worth of the city’s shares on Monday, even as onshore markets rallied. The Hong Kong dollar weakened as much as 0.05% on Monday. – Bloomberg News.

The Shanghai Composite Index climbed 1.45% to 2,814.99.

 

REST OF ASIA

South Korea moved to downgrade Japan from its list of most trusted trading partners while also seeking talks to end a months-long spat that has hurt economic ties between the two American allies.

South Korea plans to split its fast-track category into two and initially put Japan as the only country in the second one, the Ministry of Trade, Industry and Energy said Monday (12 August). The move comes less than two weeks after Japan removed South Korea from its list of “white nations” considered safe enough to export strategic materials to.

South Korean President Moon Jae-in demanded last week (ended 9 August) that Japan reconsider its decision, warning there are no “winners in this game”. The dispute has undermined the economic outlook of South Korea, which is already struggling to cope with the US-China trade war. Companies in South Korea need materials from Japan to produce memory chips and displays.

South Korea’s trade deficit with Japan was USD24b in 2018, the biggest among more than 250 trade partners, according to the Korea International Trade Association.

Industry Minister Sung Yun-mo told reporters Monday in a briefing that South Korea was ready to agree to talks with Japan during its 20-day review period before the new designation takes effect in September.

Currently 29 nations are in South Korea’s “Ga” list of most trusted trading partners for strategic materials, while all other countries belong to the other “Na” category, according to the trade ministry’s website.

Machine tools, chemicals, and stainless steel are among the types of products that South Korea’s ministry has listed on its website as subject to the export controls. Japan would be placed in the new “Ga2” category and treated “in principle” in the same way as countries in the “Na” category, the ministry said in an emailed statement. – Bloomberg News.

Shares in Sydney were 0.24% lower on Tuesday (13 August) morning with the S&P/ASX 200 Index at 6,574.30. The index gained 0.09% to 6,590.27 in the previous session.

South Korea’s Kospi Index declined 0.75% to 1,927.76 early-Tuesday morning. The benchmark fell rose 0.23% to 1,942.29 on Monday.

The Taiwan Stock Exchange Weighted Index weakened 0.21% to 10,472.36.

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