Hang Seng Index closes lower as Alibaba, Tencent share prices fall

Analysts reveal which Hong Kong stocks they think investors should avoid, with further US interest rate cuts expected next week.

Hong Kong stock benchmark Hang Seng Index (HSI) has closed lower for the second time this week, with the index finishing nearly 1% below its opening mark on Wednesday 11 March.

The HSI opened the day at 25,459.96 and ended proceedings at 25,213.33.

Share prices of Hang Seng Index’s largest listings down

Leading the decline were Chinese technology conglomerates Alibaba Group Holding (Hong Kong) and Tencent Holdings – the two largest components on the index.

Alibaba’s share price fell as much as 1.85% on the day, before finishing at HK$197 a share. The stock has not gone under HK$200 since December 2019 – a month after it was launched on the Hong Kong Exchange.

Alibaba’s share price is down 6.2% year-to-date.

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Rival Tencent also suffered a significant depreciation in stock value today. The gaming giant made the biggest impact on the Hang Seng Index, contributing a 31 point drop to the index. The company’s share price dropped as much as 1.6% on the day, before closing at HK$379 per share – 1.7% lower than Tuesday 10 March’s closing price.

Compared to Alibaba, Tencent’s share price is slightly up so far this year by 0.9%.

Other major stocks that experienced losses included China National Offshore Oil Corporation, which fell 5.9% to HK$8.52 per share; Chinese snack producer Want Want China, which dropped 2.9% to HK$6.10; Chinese financial services giant Ping An Insurance Group, which erased as much as 2% of share value on the day; and Sunny Optical – a maker of contact lenses, which saw share price tumble 2.5% to HK$125.30.

Meanwhile, Hong Kong airline Cathay Pacific saw its share price slip by 2.8% in early trading, only for it to gain 3.1% overall to HK$10.18 per share, after its earnings for the 2019 financial year, released earlier today, beat analyst expectations.

The group posted a net profit of US$217.55 million for the year ended December 2019, in line with the average estimate of 11 analysts polled by Refinitiv. However, this is still down from the US$303.81 million profit achieved in 2018.

Analysts: avoid Hong Kong banking stocks in 2020

As the global coronavirus case count nears 120,000 and total number of US cases top 1,000, analysts say things will remain uncertain for a few more months, at the very least.

‘For the next coming few months, I don’t think we will see the end of the tunnel yet. We’re not out of the woods yet,’ Louis Tse Ming-kwong, managing director of VC Asset Management is quoted as saying in South China Morning Post.

‘To encourage people to go back into the markets, we need something from the medical fields on the vaccines, such as whether any vaccines have been tested on humans with positive effects,’ he added.

Tse also warned investors and traders to avoid banking stocks, with net interest margins now expected to narrow in anticipation of further US interest rate cuts to zero.

Echoing those thoughts are Bloomberg Intelligence researchers, who told IG Asia that banks in the Hong Kong time zone are most susceptible to last week’s interest rate cut by the US central bank.

‘Hong Kong banks are the most geared toward US interest rates, followed by Singapore banks, but there’s a second order impact of whether Asian regulators and central banks will follow the US Fed rate moves as well,’ said Diksha Gera, Sector Head, Global Financials Research, Bloomberg Intelligence.

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