HONG KONG’S benchmark Hang Seng Index lost another 1.1% this week, with a 3.1% selloff on Friday alone to close the week at 19,399.92.
Major downside drivers included renewed concerns about a hoped-for recovery in the US and the ongoing debt crises in both the US and Europe, with China’s top aluminum firm losing 8% today on demand worries.
Fears of another bout of global recession undermined any better-than-expected first half results in the heart of earnings season.
A Chinese language piece in Sinafinance said that investors were dispirited by recent underperforming economic figures coming out of Washington as well as the chronic worry that Greece will not be the only EU economy to face crippling austerity measures to tackle out of control budget deficits and national debts.
Trading turnover was boosted by the selling frenzy, with daily volume totaling 81.93 bln hkd today, more robust than Thursday’s 72.18 bln.
Thursday trading in New York saw the benchmark Dow Jones Industrial Average shed 3.7%, and Hong Kong found it nearly impossible to shake off the trans-Pacific doldrums a few hours later.
News that the ranks of unemployed, manufacturing data and home sales figures in the US all came in more pessimistic than expected helped exacerbate the bearish sentiment in Hong Kong today.
Hong Kong’s blue chip sub-index, which tracks the mega-cap firms listed on the mainboard, saw 44 of its 46 constituent members finish in the red today.
Mainland China’s top alumina and finished aluminum producer, Aluminum Corporation of China Ltd (CHALCO; HK: 2600) – one of the country’s top bellwether stocks gauging manufacturing and infrastructure spending stocks – lost 8% today to close at 4.95 hkd.
A Bocom International analyst said: “Yesterday’s global capital markets really took a bite out of any resurgence of investor confidence. It seems that at the first whiff of bad news, investors in Hong Kong are likely to exercise their sell reflex. We would recommend a near-term wait and see sideline position for investors.”
The analyst added that the worst of the news from overseas is not likely over.
“Jitters from the US and the EU will probably cast a pall over sentiment in Hong Kong for the forseeable future.”
A market observer from Taiwan-based Masterlink Securities said: “The entire global investment community is currently fixated on whether US Federal Reserve Chairman Ben Bernanke will unleash another quantitative easing, which would be called QE3. As the entire world is watching for any movement on this front, I would recommend investors in Hong Kong do the same.”
The topsy-turvy performance of both the economies and capital markets in the US and Europe this past week have left Hong Kong’s bourse in the vulnerable position of reacting in kind to major movements elsewhere, rather than purely cycling on its own constituent merits.
This has led to a very distressing 13.6% drop in the Hang Seng Index over the past three trading weeks.
Economic uncertainty at home and abroad helped push the Financial Sector Sub-index down 3.7% today, while the Property Sub-index fared little better, shedding 2.6%.
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