This article was originally published on this site
Selling pressure has pushed the market below a key measure of momentum, the 50-day moving average © AP
Listen to this article
Give us your feedback Thank you for your feedback.
What do you think?
Hong Kong-listed shares tumbled to their lowest level in nearly two months as a sharp reversal in large Chinese companies, led by Tencent, triggered the biggest broad market correction in a year.
The Hang Seng index momentarily floated past the 30,000 level more than two weeks ago — the first time it exceeded this threshold in a decade — but has subsequently fallen nearly 6 per cent.
Having enjoyed a stellar run for much of 2017, the benchmark lost 2.1 per cent on Wednesday and recent selling pressure has pushed the market below a key measure of momentum, the 50-day moving average.
Manu George, a fund manager at Schroders, said the sell-off reflected a flutter of pessimism “after months of happiness”.
“What we’re seeing is investors not feeling comfortable [and] wanting to lock-in these exceptional gains,” he added.
This has been particularly true for technology stocks. The share price of Hang Seng heavyweight Tencent dropped 2.7 per cent on Wednesday, and had slid 17.5 per cent in the past two weeks. This was consistent with the global tech sell-off and traders’ desire to book gains on their best performers — Tencent had climbed 93 per cent in the year to date, and briefly eclipsed Facebook’s equity value in November.
The Hang Seng China Enterprises index, composed of Hong Kong-listed, large-cap Chinese companies, on Wednesday dropped 2.8 per cent to its lowest point since the start of October.
Analysts said investors were taking profits after a strong run in Hong Kong-listed equities this year, with the HSCE index up 18.8 per cent in the year to date.
“We have seen good equity returns this year . . . [but with] uncertainty in the US and in North Korea, some investors are taking the opportunity to sell,” said Jackit Wong, vice-president of global market research at MUFG Asia.
Value Partners fund manager Frank Tsui said it was reasonable to see profit-taking given the double-digit returns seen this year among many offshore China equity indices.
“I think it is rather a long due market correction after the 11th consecutive month of positive return for MSCI China this year,” Mr Tsui said.
All these stocks are high-flyers, with Guanzhou Auto up 87 per cent in the year to date, and Geely surging 239 per cent.
“Market sentiment has turned more cautious as investors are selling off heavy gained stocks including those indices related to high tech and carmaking stocks,” said Ben Kwong, Hong Kong head of research for KGI Securities.
Nicholas Yeo, a fund manager at Aberdeen Asset Management, said the anticipation of an interest-rate increase has sparked a rotation into some financial names and out of technology stocks.
This has followed last week’s rise in the one-month Hong Kong interbank offered rate, or Hibor, which rose above the 1 per cent mark to the highest level since the financial crisis.
Increasing interest rates help boost banks’ profit margins. Analysts note that improvements in banks’ non-performing loans have also buoyed financials.