|Day's Range||25,249.51 - 25,692.28|
|52 Week Range||24,540.63 - 30,280.12|
(Bloomberg) -- Hong Kong’s financial markets are in one of their most volatile periods in years, and signs of a turnaround are few and far between.A brief rebound in stocks is fading as concern grows over the impact the trade war, political unrest and a weak yuan are having on corporate earnings and the economy. Investors pulling funds from the city would undermine the local dollar and potentially force the central bank to defend the peg. That would tighten liquidity, spike interest rates and pressure a fragile property market.Hong Kong stands out even as markets worldwide are dragged down by a deterioration in growth. With no obvious end in sight to anti-government demonstrations, the local dollar is returning toward the weak end of its trading band and the Hang Seng Index has lost more than 8% since the end of June, on course for its worst quarter in four years.“It’s still too early to call the bottom,” said Raymond Chen, a portfolio manager with Keywise Capital Management (HK) Ltd. in Beijing. “The local incident looks far from being resolved. We’d stay cautious about putting money in the Hong Kong market.”There’s been some encouragement. Hong Kong equities are proving popular with investors from mainland China, attracted by their lowest valuations since late 2016. They funneled net $7.4 billion across the border over 26 consecutive sessions through Friday, though trading via exchange links accounted for only about 11% of daily turnover in the city’s equities during that period.Calm is also returning to the options market, where the price of bearish puts on the Hang Seng Index has dropped versus the cost of bullish calls in the past two weeks. That shows there’s less demand to hedge against further declines in the gauge. The spread, known as skew, spiked to a one-year high on Aug. 6.Tim Nan, chief investment officer of Nanjing Hilltop Investment Management Co., has added more Hong Kong-listed Chinese firms in his portfolio.“The core value of Hong Kong is that it functions as a transit for China’s economy and the domestic financial system, and I don’t think the conflicts are going to change that,” Nan said. “Since that core value remains unharmed and quality stocks are getting cheaper, why not buy on the dips?”But the protests are a big overhang, at times bringing parts of the city -- including the international airport -- to a standstill and clouding the economic outlook. Financial Secretary Paul Chan said gross domestic product will grow 0% to 1% this year, down from a previous forecast of 2% to 3%. China is also pushing the development of Shenzhen, including possibly granting it privileges in yuan internationalization, a potential threat to Hong Kong as the offshore center.“Stocks may have largely priced in the local incidents, but it’s hard to gauge the ramifications in the medium to long run, including whether China’s development plan for Shenzhen is aimed at replacing Hong Kong,” said Ronald Wan, chief executive of Partners Capital International Ltd.Hong Kong Adds $2.4 Billion in Stimulus as Protests Hit EconomyWan is watching how trade talks between China and the U.S. evolve in the coming months, as well as corporate earnings. The impact from protests, which kicked into high gear in early June, on local tourism and consumption hasn’t yet been reflected in corporate results, he said. “It may only start to bite in the second half.”Most Hong Kong retailers have seen sales drop more than 50% in August, the city’s Retail Management Association said Thursday, urging landlords to halve rents for six months to help tenants through difficult times. The value of retail sales dropped for a fifth straight month in June, official numbers show.Morgan Stanley warned this week that the Hang Seng Index could drop to 21,500 points given the “current environment” and investors should “remain defensively positioned and sell near term rallies.” That level would signal a bear market as it implies more than 20% downside from an April peak. The benchmark rose 0.5% Friday to 26,179.33.Watch More: (Updates prices throughout.)To contact Bloomberg News staff for this story: Amanda Wang in Shanghai at email@example.comTo contact the editors responsible for this story: Sofia Horta e Costa at firstname.lastname@example.org, Will DaviesFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Powell is likely to set the tone in the global stock markets for several weeks when he delivers his speech at the Jackson Hole, Wyoming central bankers’ symposium. Investors are hoping Powell presents a dovish front by signaling a series of rate cuts over the next 12 months.
Traders are blaming a number of factors on the weakness including concerns over U.S.-China trade relations, a potential global recession and political unrest in Hong Kong. Some say weak manufacturing activity in Japan helped turn the intraday trend lower.
(Bloomberg) -- Hong Kong stocks are poised for their worst quarter since 2015 and corporate earnings are unlikely to save them.After a sell-off erased more than $600 billion from the city’s equities, attractive valuations stood as a potential bright spot. But those multiples don’t look so good when analysts keep slashing their profit forecasts for 2019. Their call for an average 19% slump in operating income would be the biggest contraction for Hang Seng Index companies since the global financial crisis, data compiled by Bloomberg show.While a protracted U.S.-China trade war and a weak yuan are to blame for a big chunk of the profit reductions, the latest cuts reveal a deeper issue. With Hong Kong’s slowing economy buckling under the pressure of 11 straight weeks of protests, demand for everything from bank loans to utility gas may be jeopardized.“The third quarter could be even worse given the local political situation and the trade war escalation,” said Jackson Wong, asset management director at Amber Hill Capital Ltd. “Potential downside surprises have not been fully reflected in share prices."Shangri-La Asia Ltd. slumped as much as 7.5% Thursday after saying “political events” in Hong Kong affected one of its flagship hotels in the city, while the weaker yuan hurt revenue in mainland China. Cathay Pacific Airways Ltd. also said the protests will have a “significant impact” on revenue from August. The airline, which saw its employees’ participation in the Hong Kong protests draw the ire of Beijing, cited weaker business and leisure traffic into the city.Shares of utility provider Hong Kong and China Gas Co. fell 5.3% Wednesday after it posted disappointing results and said the local business environment is “full of challenges.” Political unrest in Hong Kong may dampen its sales to the hospitality industry as people opt to cook at home rather than dine out, analysts at Daiwa Securities Group Inc. say.The threat from the trade war and weeks of local unrest has been apparent in the property market, as well as hotel occupancy and retail sales. CK Asset Holdings Ltd., whose shares fell to lowest since January 2017 last week, postponed a luxury residential project because of the protests. It spent about $3.3 billion buying British pub owner Greene King Plc.HSBC Holdings Plc and BOC Hong Kong Holdings Ltd. have lost about 9% this month as investors become increasingly concerned about capital flight.A weak yuan is also bad news for the Hang Seng Index: its firms get an average 64% of revenue from the mainland, and 22% from Hong Kong, Morgan Stanley calculates. The currency broke past the key 7 per dollar this month for the first time since 2008, and has traded weaker than that level for more than two weeks.The gloomy profit outlook comes at a critical time for Hong Kong’s equity market. While cheap valuations spurred some dip-buying this week, strategists at Morgan Stanley and Credit Suisse Group AG are among those turning more bearish. The Hang Seng Index is still down 13% since its April high, one of the worst returns in the world.“I don’t know when earnings will turn around,” said Amber Hill’s Wong. “For that to happen, we at least need a stable political environment in Hong Kong and an agreement to end the trade war."(Adds Shangri-La Asia earnings in fifth paragraph.)\--With assistance from Kari Lindberg and Matt Turner.To contact the reporter on this story: Jeanny Yu in Hong Kong at email@example.comTo contact the editors responsible for this story: Sofia Horta e Costa at firstname.lastname@example.org, David WatkinsFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
The major European stock markets are trading higher at the mid-session and Asian shares finished mixed as investors await the release of the minutes from the U.S. Federal Reserve’s July monetary policy meeting. Additionally, there are reports that President Trump may be weighing measures to boost the U.S. economy. Perhaps keeping a lid on the markets are lingering concerns over U.S.-China relations after Trump “reiterated on Tuesday that he was not prepared to make a trade deal with China amid the current standoff, with Chinese communications giant Huawei still firmly in Washington’s cross hairs,” according to CNBC.
Basically, the move by the Bit’s another way for companies to get cheaper money, which should be a positive for the economy and China’s stock market. In theory, the MLF rate could follow U.S. rates, which means if the Fed cuts rates, MLF rates will follow lower.
Hong Kong-listed WH Group could see its shares rally. Here's what investors should know about the world's largest pork producer.
Buyers are responding to a recovery in U.S. Treasury yields, which may be serving as a sign that talk of a U.S. recession may have been overblown.
(Bloomberg) -- It’s turning into a struggle of wills between bears betting against Hong Kong equities and mainland Chinese investors.Short selling volume on Hong Kong’s main board climbed to 17% of total turnover this week, the highest proportion since at least 1998, based on a five-day moving average. That’s not deterred mainland investors, who were net buyers of Hong Kong stocks via exchange links for the 21st day on Friday.So far bears have been winning. The benchmark Hang Seng Index has tumbled by about 15% from its April high to be among the world’s worst performers, while selling momentum this week was the strongest since China’s currency devaluation four years ago. Mainland buyers are seeing some success though -- the gauge has rebounded 1.8% in the three days through Friday.To be sure, previous surges in the short selling ratio haven’t been a great indicator for future moves. Back in 2016, a spike was followed by an almost 70% rally. But the pessimistic case for Hong Kong shares is easy to sketch.The city is facing one of its worst crises in decades as increasingly violent protests mar its image as a safe and easy place to do business and shop. There is now serious debate about whether Beijing will use military measures to quell the protests after stationing troops in a stadium across the border.Companies are falling foul of the newly politicized environment. Cathay Pacific Airways Ltd. shares plunged after being singled out by Chinese entities for not sufficiently punishing employees sympathetic to the demonstrators. The airline, which has since fired staff who’d been suspended in relation to the protests, announced Friday that Chief Executive Officer Rupert Hogg had resigned "to take responsibility as a leader of the company in view of recent events."The trade war with the U.S. is also hurting the local economy, as well as damping demand for Chinese companies listed in Hong Kong. A weak yuan is adding further pressure.Mainland investors have kept the faith, however, purchasing a net $5.8 billion of Hong Kong stocks in the past 21 sessions, the longest run of inflows since February 2018. They bought the most in nearly 18 months on Friday.To contact the reporter on this story: Jeanny Yu in Hong Kong at email@example.comTo contact the editors responsible for this story: Sofia Horta e Costa at firstname.lastname@example.org, David Watkins, Magdalene FungFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Investors are getting anxious about the impact anti-government demonstrations are having on Hong Kong’s banks.“Things will be going down if people start seeing Hong Kong, which is an international financial center, differently,” said Ronald Wan, CEO of Partners Capital International Ltd. “There will be concern over banks if we see significant capital outflows as they will lose support for business.”It’s not just anti-government demonstrations, now in their 11th week, that are hurting banks in the city: a slowing economy, weaker Chinese currency -- down 2.5% since the end of June -- and the trade dispute with the U.S. create a troublesome mix. And it’s showing in the stock market.HSBC Holdings Plc’s shares have plunged 13% in just three weeks and are near the most oversold since at least 1989, while BOC Hong Kong Holdings Ltd. has dropped 12% this month. Lenders’ losses have weighed on the benchmark Hang Seng Index, which is among the worst-performing major equity gauges in the world this August, though it rose 0.9% Friday.Citigroup Inc. has turned more cautious on Hong Kong banks, saying in a research note last week that the weakening yuan would cause a “drastic” decline in loans to mainland China clients and hurt asset quality. “We see bigger earnings risk to Hong Kong banks,” analysts including Yafei Tian wrote, downgrading the rating on BOC Hong Kong to neutral. They also said there’s 20% to 60% downside in the sector’s earnings per share.Demonstrations in Hong Kong, sparked by opposition to an amendment to the extradition law, show no sign of letting up and have become increasingly disruptive. The city’s airport, one of the busiest in Asia, was brought to a standstill earlier this week as protesters swarmed the terminal, resulting in the cancellation of flights.“Investors don’t want to delve deeply into politics but this is something they don’t want to see,” Wan said.Hong Kong’s Financial Secretary Paul Chan said Thursday that the city’s economy will struggle to expand at all this year, slashing the gross domestic product growth forecast to just 0%-1% from 2%-3% previously. Chan also announced fiscal support measures, with a stimulus package worth more than $2 billion.(Updates prices.)\--With assistance from Jeanny Yu.To contact the reporter on this story: Alfred Liu in Hong Kong at email@example.comTo contact the editors responsible for this story: Sam Mamudi at firstname.lastname@example.org, Will Davies, Jun LuoFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Some investors may have been lulled into believing that recession is imminent and guaranteed, but that’s not the case with this inversion indicator. Research shows the stock market could rally for 15 months after the inversion, and recession may not start until 22 months after the first signal is flashed.
Hong Kong’s tumbling equity market is stoking fears for the economy, as well as the stability of the capital markets.
(Bloomberg) -- Stocks in Hong Kong and China rose, contrasting with losses elsewhere in Asia following a global sell-off.The Hang Seng Index closed up 0.8% after falling as much as 1.6%, lifted by property-related stocks. A gauge of Chinese stocks in Hong Kong climbed 0.4%. Both have lost around 16% from their April highs, weighed down by the U.S.-China trade dispute and protests in Hong Kong. The Shanghai Composite Index added 0.3% and the yuan weakened slightly onshore. The small-cap ChiNext index rose 1.2%."The market was seriously distressed after earlier selloffs, so we’re seeing a dead cat bounce right now along with some possible short covering," said Alex Wong, Director of Asset Management at Ample Capital Ltd. The Hang Seng Properties Index gained 3.3%, its biggest increase since January, after weeks of anti-government protests in Hong Kong dragged the gauge to its lowest this year. New World Development Co. saw its biggest gain since 2009.Stocks dropped elsewhere in Asia after the U.S. government bond market sounded alarms over the health of the economy. The 10-year Treasury yield slipped below the rate on two-year bonds for the first time since 2007, in what is considered to be a signal of a U.S. economic recession beginning in next 18 months. Such expectations have been bolstered by signs that global growth is slowing, prompting investors to flee riskier assets.“The market is already is quite weak and this additional risk from the inverted curve would put more pressure on,” said Daniel So, strategist at CMB International Securities Ltd.Tencent Holdings Ltd. was a drag on Hong Kong stocks, falling as much as 4.2% after its quarterly revenue missed expectations. The results triggered several price cuts by analysts, who expect the social media giant’s online advertising business to remain sluggish due to intensifying competition.“Fear of a U.S. recession added to market worries as poor second-quarter economic data in Asia already concerned investors,” said Banny Lam, head of research at CEB International Investment Corp. “Tencent’s earnings miss is also affecting the market.”Hong Kong Roiled by Recession Fears, Market Plunge, Retail SlumpMainland investors continued to pile into Hong Kong stocks via exchange links with Shanghai and Shenzhen as some investors see dip buying opportunities. They pumped money across the border to buy stocks for a 20th day on Thursday, spending $589 million according to data compiled by Bloomberg, extending the longest streak of inflows since February last year.Wharf Real Estate Investment Co., Link Reit and Sun Hung Kai Properties Ltd. added at least 4%, among the best performers on the Hang Seng Index. MTR Corp., which develops real estate in Hong Kong and operates the city’s railway network, advanced 4.4%.The Hong Kong dollar jumped as much as 0.17%, as 12-month forward points surged in a sign of tighter liquidity in the market. It pared the advance to 0.1%.To contact Bloomberg News staff for this story: Amanda Wang in Shanghai at email@example.com;Kari Lindberg in Hong Kong at firstname.lastname@example.orgTo contact the editors responsible for this story: Sofia Horta e Costa at email@example.com, David Watkins, Will DaviesFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Early Thursday, the yield on the 30-year Treasury bond dropped to a record low in the morning of Asian trading hours, breaking the 2% level for the first time, according to Reuters.
(Bloomberg) -- Several Chinese companies are rethinking fundraising plans in Hong Kong as anti-government protests rock the city, an ominous sign for its future as a financial gateway between Asia’s largest economy and the rest of the world.One company scrapped preliminary preparations for a $500 million initial public offering in Hong Kong partly because of the unrest and will instead pursue a U.S. listing, according to a senior banker on the deal, who asked not to be named discussing private information. Another banker said at least two companies are considering the same move for IPOs worth a combined $1 billion, adding that final decisions will depend on market conditions and whether the turmoil in Hong Kong eases.While the deals represent a small portion of the money raised by Chinese businesses in Hong Kong in recent years, they bode ill for the city’s status as one of the world’s premier financial hubs. Two senior bankers said Chinese clients are worried about more than just this week’s shutdown of Hong Kong’s airport and other logistical headaches caused by the protests; they’re also questioning whether the city will remain a stable place to do business over the long term.“The social and political instability has had an impact on people’s perceptions,” said David Cho, a partner at law firm Dechert LLP based in Hong Kong. “The pipeline isn’t looking strong for the remainder of the year, and things could get even worse if China decides to crack down more forcefully in Hong Kong.”The city’s benchmark Hang Seng Index has tumbled 12% over the past three weeks as clashes between protesters and police turned increasingly violent, raising fears that the Chinese military may intervene to restore order. The S&P 500 Index fell about 5% during the same period.The stakes could hardly be higher for Hong Kong, whose economy is highly dependent on the financial industry. Chinese companies accounted for $9 billion of the $11 billion raised via IPOs in the former British colony this year, as well as about 80% of bond sales in the city, data compiled by Bloomberg show. Outstanding China-related loans by Hong Kong banks totaled more than $560 billion at the end of the first quarter, according to the Hong Kong Monetary Authority.The city faces competition from international hubs like the U.S. and Singapore, as well as financial centers in mainland China. A gradual loosening of restrictions on foreign investment has turned Shanghai and Shenzhen into increasingly feasible options for Chinese firms who want access to overseas funds.Even so, few expect China Inc. to abandon Hong Kong’s financial system en masse. U.S. markets are seen as a more stable, but their appeal to Chinese issuers has also diminished somewhat in recent months as the trade war soured relations between the two countries.One closely watched test of Hong Kong’s appeal is Alibaba Group Holding Ltd.’s proposed mega-listing in the city. The e-commerce giant has filed a listing application for a share sale that may raise as much as $20 billion, people familiar with the matter said in June, but the company has stayed quiet about its intentions since the protests escalated.Even if the Alibaba deal proceeds as planned, there’s little doubt that Chinese executives have become more wary of Hong Kong. In addition to those rethinking IPOs, several are canceling or postponing meetings with investors in the city to avoid the risk of getting caught up in protest-related violence or travel disruptions, bankers said. Some are using video conferences instead.Hong Kong’s turmoil has affected the financial industry in other ways. BlackRock Inc., the world’s largest asset manager, postponed its Asia Media Forum in the city to February from September, a company spokeswoman said on Wednesday, so that “as many partners as possible” would be able to join.While CLSA Ltd. plans to go ahead with its popular annual forum in Hong Kong next month, the investment bank has hired a private security company for the event and is working on contingency plans that include a livestream in case some delegates are unable or unwilling to attend in person.\--With assistance from Tongjian Dong, Annie Lee, Andy Clarke and Alfred Liu.To contact the reporters on this story: Cathy Chan in Hong Kong at firstname.lastname@example.org;Manuel Baigorri in Hong Kong at email@example.comTo contact the editors responsible for this story: Sam Mamudi at firstname.lastname@example.org, Michael PattersonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- The bad news for investors who waited this long to buy equity hedges is they’ve become eye-wateringly expensive. The good news is Wall Street thinks there are a few cheap strategies left.A gauge tracking the price of bearish S&P 500 options versus bullish contracts -- or skew -- sits near an all-time high, according to Goldman Sachs Group Inc. Yet even now there are pockets of value for those waking up to risks like a U.S. recession, worsening trade war or Hong Kong unrest.“Cheap protection still exists if you know where to look,” Bank of America Corp. strategists led by Stefano Pascale wrote in a note Tuesday.Finding it takes some rummaging around in the complex underbelly of the options market.Pascale and team point out that while closer-to-the-money S&P 500 options prices have spiked, those further out-of-the-money remain relatively underbid. To capitalize on this “striking” phenomenon, they recommend a so-called put fly. The trade involves purchasing a bearish put option, selling two puts that are further below the current price and buying yet another that’s even further out of the money.The S&P 500 Index slumped 2.9% on Wednesday and the Dow Jones Industrial Average plunged 800 points. Risk assets were roiled by weak economic data from Germany and China and by recession warnings flashed by the bond market.For those concerned about European stocks, the bank suggests funding protection on the Euro Stoxx 50 with short VStoxx puts. And recent hedging from structured-products issuers has pushed down two-year at-the-money volatility on the Hang Seng China Enterprises Index, making long-dated options on the gauge appear relatively cheap, they said.Back in the U.S., S&P 500 skew remains elevated following last week’s sell-off. That’s somewhat unusual, according to Pat Hennessy, head trader at IPS Strategic Capital.“Generally, skew starts weakening after the first leg down as vol sellers roll options down and out and fear abates. Not at all the case right now,” Hennessy tweeted. Among the reasons for it could be portfolio managers holding more equity risk on their books and a relative dearth of put selling, he said.Macro Risk Advisors has also crunched the numbers to find the best places for worried investors to protect against growing turmoil.“U.S. technology, high yield, oil, emerging markets (e.g. broad EM, China, Brazil), EAFE, and FX implied volatility are all trading attractive to U.S. equity implied volatility,” strategist Maxwell Grinacoff wrote in a note Tuesday.Grinacoff suggests buying puts on benchmark emerging-market and oil ETFs, while touting put spreads on the largest Nasdaq-tracking fund, QQQ.(Updates with Wednesday market moves.)To contact the reporter on this story: Joanna Ossinger in Singapore at email@example.comTo contact the editors responsible for this story: Christopher Anstey at firstname.lastname@example.org, Yakob Peterseil, Samuel PotterFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Share markets fell for a third straight day on Tuesday as fears about a drawnout global trade war, protests in Hong Kong and a crash in Argentina's peso currency kept investors huddled in bonds, gold, and the Japanese yen for safety. If that wasn't enough, Europe's bourses and the euro were given an additional shove lower by an alarming German sentiment survey after some heavy falls in China, Hong Kong, Japan had also whacked down Asia overnight.
Police and protesters clashed at Hong Kong's international airport on Tuesday after flights were disrupted for a second day as the political crisis in the former British colony deepened. In Washington, U.S. President Donald Trump said the Chinese government was moving troops to the border with Hong Kong and he urged calm.
Although Hong Kong’s airport reopened on Tuesday after it was shut down on Monday due to protestors staging a sit-in at the airport, one economist still described the situation in Hong Kong as “very disconcerting.”
Stocks reversed gains after Hong Kong International airport announced it has cancelled all departures for the remainder of the day, according to multiple media reports.
The People’s Bank of China fixed its midpoint for the yuan at 7.0136 against the dollar on Friday – the second time this week the benchmark was set weaker than 7. China’s consumer price index in July rose 2.8% on-year – its fastest year on-year pace since February 2018, according to data from the National Bureau of Statistics.
The major U.S. stock indexes are expected to open the cash market higher, based on the pre-market futures trade. Investors are shifting toward “risk-on” sentiment because of a stable yuan and firming U.S. Treasury yields. These two markets will influence prices all session.
Aug.25 -- Hao Hong, head of research and chief strategist at Bocom International, discusses the Hong Kong markets and if now is a good time to get in. He speaks on “Bloomberg Markets: China Open.”