Chinese shares drag on Hong Kong as yuan-watchers await Fed
HONG KONG (NewsRise) -- Hong Kong shares edged lower on Wednesday as concern about the impact of rising U.S. interest rates on the yuan weighed on mainland companies.
The Hang Seng Index slipped 0.2% to 23,792.85. Cathay Pacific Airways reversed early gains to end 1.4% lower after reporting a net loss of 575 million Hong Kong dollars ($74 million). It initially fell as much as 7.7% from its morning close when trading resumed in the afternoon following its warning that the challenging operating environment remained.
Oil explorer CNOOC shed 1.1% to lead losses in the energy sector. The Hang Seng China Enterprises Index, a gauge of mainland companies listed in Hong Kong, fell 0.4%.
Caution prevailed across Asia as traders accepted a 25 basis-point rate increase by the Federal Reserve later on Wednesday as a near certainty and shifted focus to the future pace of tightening. The monetary authority has hiked rates only twice in the last decade and has already signaled the possibility of three increases in 2017. The Nikkei Asia300 Index was little changed for the day at 1,141.09.
Both the Shanghai and Shenzhen benchmark indexes were largely flat.
"For China markets, any aggressive signaling of additional rate hikes will lead to pressure on the yuan and be negative for equity markets," said Louis Tse, director at Hong Kong-based VC Brokerage.
Mainland equities and the yuan have been largely stable over the past several weeks as authorities restricted capital outflows and imposed curbs to support a yuan that had dropped to eight-year lows late last year. Premier Li Keqiang, speaking at a press conference at the conclusion of China's annual parliamentary session on Wednesday, said Beijing will continue to pursue currency reform and does not hope to boost exports via yuan depreciation. The onshore traded yuan was little changed at 6.911 against the dollar on Wednesday, hovering close to a more than two-month low.
Authorities are considering introducing a bond trading link between Hong Kong and the mainland by year-end, allowing investors to buy mainland bonds in the city, Li said.
New World Development and Hang Lung Properties each slipped at least 0.3% amid concern an increase in mortgage interest rates will mute housing demand in Hong Kong. Mainland developer Agile Group Holdings jumped 6.6% to HK$6.47 after reporting a 64% surge in last year's net profit attributable in shareholders.
"For Hong Kong, the property market contributes sizably to the city's gross domestic product and faster U.S. interest rate increases will be negative," Tse added.
China Unicom Hong Kong rose 0.1%. Shortly after markets closed, the mobile telecom provider reported a 94% plunge in 2016 net profit to 630 million yuan ($91.16 million).
ZTE added 3.1%. The telecom equipment maker appointed Yin Yimin as its chairman in place of Zhao Xianming.
China Power New Energy Development added 2.6% after saying it expects a "substantial" increase in 2016 net profit.
China Longyuan Power Group slid 4.2% to HK$6.46. The renewable-energy company late Tuesday reported a 23% increase in 2016 net profit to 3.55 billion yuan.
--V. Phani Kumar and Nimesh Vora