‘Hold’ call amid fog

China Daily (Canada) - - HONG KONG - By EMMA DAI in Hong Kong em­madai@chi­nadai­lyhk.com

Mar­ket cor­rec­tion in Hong Kong ex­tended for the sev­enth straight week un­til last Fri­day and strate­gists are united in calls to “hold cash”, given that un­cer­tainty is thick­en­ing ahead of Au­gust eco­nomic data from the Chi­nese main­land and the US Fed­eral Re­serve meet­ing in mid-Septem­ber.

The lo­cal bench­mark Hang Seng In­dex (HSI) fell 3.57 per­cent or 772 points dur­ing the four trad­ing days last week to set­tle at 20,841.61 at close last Fri­day. The lo­cal stock bench­mark, head­ing south for seven weeks in a row, has pared more than 26 per­cent since reach­ing a seven-year high of 28,444 on April 27 this year.

Hang Seng China En­ter­prises In­dex, which tracks Hong Konglisted main­land com­pa­nies, sank 5.94 per­cent or 579 points last week to close at 9,169.59 last Fri­day.

Call­ing mar­ket per­for­mance “weak and dis­ap­point­ing” given rel­a­tively sta­ble ex­ter­nal fac­tors, Will Le­ung Chun-fai, head of Hong Kong and Greater China in­vest­ment strat­egy at Stan­dard Char­tered Bank, said he ex­pects a bet­ter week ahead.

“Mar­ket sen­ti­ment could re­vive on fur­ther clar­ity of the tim­ing of the first (US) in­ter­est rate hike, af­ter the latest US la­bor mar­ket data is re­leased over the week­end. Early next week, we should ex­pect new mar­ket con­sen­sus on whether the Fed (US Fed­eral Re­serve) will kick off in­ter­est nor­mal­iza­tion in Septem­ber. If rate hike ex­pec­ta­tions could ease for the time be­ing, the stock mar­ket will see a re­bound,” Le­ung told China Daily.

Data from the US Bureau of La­bor Sta­tis­tics last Fri­day were lower than pre­vi­ous estimations. The bureau posted a net gain of 173,000 non­farm new jobs in Au­gust, com­pared with a 215,000 head­count rise in July.

Pre­vi­ously, a Reuters sur­vey sug­gested mar­ket es­ti­ma­tion of in­crease in pay­rolls by 220,000, while econ­o­mists polled by Mar­ketWatch pointed to 213,000 new jobs. Mean­while, all eyes are also on the China Na­tional Bureau of Sta­tis­tics, which is due to re­lease Au­gust data for the con­sumer price in­dex and pro­ducer price in­dex on Thurs­day.

Peter Pak, ex­ec­u­tive di­rec­tor of BOCI Se­cu­ri­ties Ltd, cau­tioned in­vestors that the best strat­egy is to sit on the fence with cash, given that mar­ket sen­ti­ment is vul­ner­a­ble and the di­rec­tion un­clear ahead of the Fed­eral Open Mar­ket Com­mit­tee meet­ing sched­uled from Sept 16 to 17.

“Val­u­a­tion has been low in Hong Kong, but there is also con­sid­er­able un­cer­tainty,” Pak said. “In­vestors have been un­der­weight­ing high-beta sec­tors, such as bro­ker­ages, de­vel­op­ers and com­modi­tyrelated stocks, and fa­vor­ing de­fen­sive choices.”

“If the Fed hints at a de­lay in lift­ing in­ter­est rates, the lo­cal mar­ket is due to re­bound, to roughly 22,000 to 23,000 level. It would hardly go back to the pre­vi­ous high in April, as a lot of in­vestors have been locked in since the col­lapse in early July. Fur­ther­more, the rate­hike cy­cle, even if it is post­poned to the year-end, is still on the hori­zon any­way.”

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