Hong Kong’s stock rebounds have been punishing


Subsequent falls are a painful reversal for those who chased the rally at the start of the week
Chief Investment Office22 Nov 2019
    Photo credit: AFP Photo


    MAINLAND CHINA & HONG KONG

    The only certainty in Hong Kong’s stock market right now is that rebounds do not last.

    The Hang Seng Index fell 1.57% to 26,466.88 Thursday (21 November) amid signs of a widening rift between the US and China, with US President Donald Trump expected to sign a bill supporting Hong Kong protesters. Losses in the city were among the worst in Asia, a painful reversal for investors who had chased its world-beating rally at the beginning of the week.

    The lack of resilience in Hong Kong marks a departure from the start of 2019, where investors treated bad news as transitory and used declines as opportunities to buy the dip. Now, they are shifting to sell the rally. That is endangering this year’s gains, putting the Hang Seng Index at risk of posting its first back-to-back annual loss since 2002. It is up just 2.4% for the year, down from 17% at its April high.

    The US bill is throwing another wrench into Hong Kong’s fourth-quarter stock performance. A weak yuan makes matters worse, as Hang Seng Index members get an average 64% of revenue from the mainland.

    Meanwhile, local firms are struggling as the city’s economy heads for a recession and retail sales plunge. Property stocks bore the brunt of the selloff, with a gauge of related firms dropping as much as 3%. – Bloomberg News.

    The Shanghai Composite Index fell 0.25% to 2,903.64.

     

    REST OF ASIA

    Indonesia’s central bank left its key interest rate unchanged while pumping more liquidity into the financial system to stimulate Southeast Asia’s largest economy.

    Bank Indonesia (BI) kept the seven-day reverse repurchase rate unchanged at 5% on Thursday (21 November) following four rate cuts this year, in line with the prediction of 21 of 31 economists surveyed by Bloomberg. The reserve requirement ratio for banks was cut by 50 bps, the first such decision since June.

    After 100 bps of rate cuts since July, the central bank is taking a more cautious approach in providing stimulus to the economy, turning to additional instruments to spur lending. With growth likely to remain subdued amid a sluggish global outlook, Governor Perry Warjiyo said there is still room for more policy easing, either through monetary levers or macroprudential tools.

    “Monetary policy remains accommodative and is consistent with controlled inflation in the target corridor,” Warjiyo told reporters in Jakarta. “Going forward, Bank Indonesia will monitor domestic and global economic developments in using its room to implement an accommodative policy mix.”

    But Coordinating Minister for Economic Affairs Airlangga Hartarto was quick to call for further easing, saying there is “quite a large room” for the central bank to further cut the rate given benign inflation and a stable currency. The benchmark rate at 5% is “pretty high” compared to countries such as the Philippines, Malaysia, and Thailand, he said in a statement.

    The rupiah erased losses after the decision was announced to end little changed, while the yield on benchmark 10-year government bonds rose 3 bps to 7.09%.

    After raising rates last year to curb a currency rout, BI has switched its focus to supporting growth amid a global slowdown and the US-China trade war. It expects Indonesia’s economy to grow 5.1% this year. – Bloomberg News.

    Shares in Sydney were higher Friday (22 November) morning with the S&P/ASX 200 Index up 0.49% at 6,705.30. It fell 0.74% to 6,672.91 on Thursday.

    South Korea’s Kospi Index added 0.15% to 2,099.75 at the open on Friday, after tumbling 1.35% to 2,096.60 the previous session.

    The Taiwan Stock Exchange Weighted Index (Taiex) lost 0.63% to 11,558.27.

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