Hong Kong shares swing to weekly loss with property risks under review
HONG KONG (Nikkei Markets) -- Hong Kong shares posted their steepest weekly drop in three months, as investors appeared to reconsider property-sector risks after the Federal Reserve lifted borrowing costs and signaled one more rate hike later this year.
The Hang Seng Index capped a weekly loss of 1.6%, halting a five-week rising streak, even as it advanced 0.2% on Friday. Hang Lung Properties slumped 7.1% during the week to lead the real estate sector lower after the Hong Kong Monetary Authority raised its policy interest rate by 0.25 percentage points Thursday, mirroring the Fed's rate increase. Although widely expected, the Fed's move left some investors pondering whether record high property prices in the city were sustainable. Hang Lung slid 1.8% on Friday.
"While ample liquidity is currently keeping mortgage rates in check, there is an increasing risk that we could see demand slowing down and prices correcting later this year or next year," said Louis Tse, asset management director at VC Brokerage.
Heavyweight Tencent Holdings shed 1.7% and AAC Technologies Holdings lost 3.5% over the five-day period as they got caught up in a global selloff of technology stocks. The Nasdaq Composite is on course for a second weekly loss. Tencent slipped 0.2%, while AAC gave up 1% on Friday.
Some analysts feared a broader fallout as the U.S. economy, the world's largest, itself seemed to have lost some momentum recently and doubts emerged over the ability of the Donald Trump administration to push their economic agenda through Congress.
"When the Fed is trying to raise interest rates at a time when economic growth is actually moderating, it is not good news, especially for emerging markets," said Hao Hong, managing director and chief China strategist at Bank of Communications.
The Shanghai Composite slipped 0.3% Friday, taking its weekly loss to 1.1%. The coming week will bring the MSCI's annual review on whether to include yuan-denominated A-shares in its global benchmarks, which are followed by money managers with hundreds of billions of dollars in assets. While MSCI had decided against their inclusion in its previous three reviews, some analysts are more hopeful this year.
"We assign a greater-than-even chance that MSCI will decide in favor of inclusion on June 20, but do acknowledge the risk of another failure if MSCI is unwilling to compromise," AXA Investment Managers wrote in a note. They were referring to the lack of resolution over stock exchange rules in China, which require their pre-approval for any investment products linked to A-shares, even if they are listed outside of China.
China Vanke slipped 0.2% on Friday. The mainland developer is in talks to join a management-backed consortium bidding for Singapore-listed warehouse operator Global Logistic Properties, Bloomberg reported, citing people with knowledge of the matter. Global Logistic Properties climbed 1.4% in Singapore.
Texwinca Holdings added 4.7% after reporting a 54% drop in net profit for the year ended March 31. Last month, the company had warned its annual profit may decline as much as 60%.
China Merchants China Direct Investments rose 1.4% after saying it sold 9.4 million A-shares in Industrial Bank for about 154 million yuan ($22.6 million). Shares of Industrial Bank ended little changed in Shanghai.
Cowell E Holdings surged 19% after saying that it expects a "significant" improvement in profit for the six months ending June 30.
-- Nimesh Vora and V. Phani Kumar