Hong Kong stocks fall as HKMA’s currency market intervention fuels fears of further capital outflow

  • Hang Seng Index eases 1.1 per cent at the noon break, reversing gains made a day earlier
  • Tech giants Alibaba and JD.com and property firms Country Garden and China Overseas Land weigh on the market

Hong Kong stocks fell to their lowest in two months, as the city’s monetary authority intervened to defend the local currency for the first time since 2019, fanning concerns of further liquidity outflows.

The Hang Seng Index declined 1.1 per cent to 19,615.77 at the noon trading break, extending early morning losses, after accumulating gains of 1 per cent on Wednesday. The Tech Index retreated 1.5 per cent, while the Shanghai Composite Index rose 0.2 per cent.

Alibaba Group Holding, the owner of this newspaper, slumped 4.3 per cent to HK$81.95. JD.com lost 5.4 per cent to HK$197, while Xiaomi weakened 3.5 per cent to HK$10.62. Country Garden Holdings slumped 5.8 per cent while China Overseas Land retreated 3.1 per cent.

The Hong Kong Monetary Authority bought about HK$1.59 billion (US$202 million) on Thursday to bolster the exchange rate after it weakened to HK$7.8500 per US dollar, the weak end of its HK$7.7500 to HK$7.8500 trading range. The HKMA’s first intervention in 18 months could add further pressure on interest rates, straining the economy already reeling from the impact of strict Covid measures.

“[The intervention] led to negative sentiments as some think that money is leaving Hong Kong [as] liquidity is important for stocks markets,” said Banny Lam, managing director and head of research at CEB International Investment in Hong Kong.

Elevated US inflation figures released overnight also worsened the slide in global stocks, reinforcing expectations of further monetary tightening.

“As US inflation remains high, that means the Federal Reserve will not stop raising interest rates. The trend of weakening Hong Kong dollar will continue and more outflows will be seen in the next several months,” said Lam.

Asian shares also took a hit from high inflation woes, with South Korean stocks falling 0.8 per cent, while equities in Australia and Japan lost at least 1.1 per cent.

China’s beleaguered property market saw another crack, as the country’s fourth-largest developer became the latest to default on its bond payment. Sunac China said it missed a dollar-bond coupon before its Wednesday deadline and does not expect to make payment on other notes, according to its exchange filing on Thursday. Sunac’s shares have been suspended from trading since April 1.

Chinese chip maker Hua Hong Semiconductor fell 1.8 per cent to HK$25.15, just before releasing its first-quarter results at noon. Net income grew 388 per cent from a year ago to US$102 million, beating estimates, according to its exchange filing.

The firm’s shares slumped 12 per cent on Tuesday after media reports emerged that the US was weighing a ban on American firms selling advanced equipment to Chinese semiconductor producers.

On the mainland, Jiangsu Huachen Transformer soared 44 per cent on its first day of trading in Shanghai, while Winstech Precision Holding jumped 44 per cent in Shenzhen.

Author: Cheryl Heng, SCMP

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