Gao Juan, Victory Securities

Translated by Andrew Vanburen from a Chinese-language piece in Sinafinance by Gao Juan of Victory Securities

ANYTHING ADDING BUOYANCY to the Hong Kong market these days is likely to be immediately counteracted by bourse ballast.

Upside drivers are being weighed down by bad news on the macro front.

I began writing this piece saying Hong Kong’s benchmark Hang Seng Composite Index would fluctuate in a narrow range between 20,100 and 20,400.

So when the most watched barometer of Hong Kong equities jumped nearly a full percent on Friday to close at over 20,700, I considered changing my tune, but I feel it is still valid.

On Friday, Hong Kong shares began on a downtrend.

Restaurant chain South Beauty founder Zhang Lan is hardly bearish on Hong Kong, aiming to tap the IPO market for expansion funds.  Photo: xingqi

As the afternoon session dragged on, PMI numbers trickled in on China’s lower-than-expected factory orders which of course set off alarm bells in Shanghai, Shenzhen and here in Hong Kong.

The resultant A-share slump hit shares in Hong Kong in the post-lunch session, causing a considerable intra-day net loss for the benchmark Index.

This erased much of the good will from several healthy enough interim earnings reports.

The benchmark Hang Seng Index lost 1.20% on Friday to finish at 20,591.

Despite the depressing trading day in directional terms, some sector plays were obvious winners including public works which added 0.32%.

But financial sector plays lost 0.96%, industrial counters (-1.52%) and property developers (-1.90%).

The recent drumbeat of support from Beijing in the form of some 158 billion usd in stimulus money for public works projects is chiefly responsible for the slight rise in related stocks on Thursday.

Another factor adding tremendous inflammability to benchmark index volatility is the rapidly shifting global oil price of late.

Thanks to the heavy weighting of dual-listed PRC-based petrochemical behemoths like Sinopec, Petrochina and other downstream processors, the 10% fluctuation one-week in global crude prices thanks to the Mideast political and protest-driven mayhem has played havoc with China’s energy listcos in Hong Kong.

Hong Kong shares have struggled to break out of a slump

And the significant stimulus package in Beijing last week followed by even larger such economic spurs from Tokyo and Washington – all representing the world’s top three economies – have done little to bring a semblance of stability and sanity to market-driven bourse bolstering inputs.

Therefore, it is harder than ever to predict the direction of major capital market indices at a time when governments are stepping in regularly to proactively spur on bourses when natural economic forces are sitting on the sidelines cowering.

See also:

BUYER’S MARKET? 12 Consumer Plays Eyeing HK IPOs

SPILLED MILK: China Mengniu In Yet Another Outrageous Scandal

XTEP: Overperforming In Overcrowded, Overstocked PRC Sportswear

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