Cap­i­tal out­flow curbs, rate woes spook in­vestors

Hong Kong stocks con­tinue los­ing streak as city joins global, re­gional sell-off

China Daily (Hong Kong) - - HK | BUSINESS - By LUO WEITENG in Hong Kong sophia@chi­nadai­lyhk.com

Ho n g Ko n g s t o c k s l o s t ground for the third trad­ing ses­sion in a row on Mon­day as in­vestors ran for cover on moves by the Chi­nese main­land to halt cap­i­tal out­flow, as well as hawk­ish re­marks by se­nior US Fed­eral Re­serve (Fed) of­fi­cials that more in­ter­est-rate hikes would be in store than an­tic­i­pated.

A tight­en­ing grip on cap­i­tal out­flow from the main­land, ex­ac­er­bated by a flight of funds from Hong Kong, con­trib­uted to the weak lo­cal mar­ket sen­ti­ment, while com­ments by Fed of­fi­cial Jef­frey Lacker that in­ter­est rates might have to go up more than three times next year spurred a sell-off in re­gional eq­uity mar­kets.

The bench­mark Hang Seng In­dex lost a fur­ther 0.85 per­cent, or 188.07 points, to fin­ish at 21,832.68 on Mon­day, hit­ting a fresh four-month low and track­ing its 1.94-per­cent slump last week af­ter the Fed raised bor­row­ing costs for the first time this year, with pro­jected three more in­creases next year. Hong Kong-based in­surer AIA Group shares dropped 1.24 per­cent to HK$43.85 as new re­stric­tions on main­lan­der in­vestors buy­ing in­sur­ance in the SAR took ef­fect over the week­end.

Pur­chases via China-is­sued MasterCard and Visa have been capped at $5,000 per in­sur­ance prod­uct which, ba­si­cally, put an end to a on­ce­pop­u­lar way out re­sorted to by main­lan­ders. Un­der the new curbs, main­land peo­ple will not be able to swipe credit cards mul­ti­ple times as part of ef­forts to cir­cum­vent the slew of re­stric­tions on in­sur­ancere­lated cap­i­tal out­flows from the coun­try.

“As the main­land tight­ens its grip on cap­i­tal flows into Hong Kong, and cap­i­tal ex­o­dus in Hong Kong ex­ac­er­bates with the United States head­ing for a mon­e­tary tight­en­ing cy­cle, the city’s stock mar­ket would be brac­ing it­self for more volatile ses­sions in the near fu­ture,” said Han­nah Li Wai-han, a strate­gist at UOB Kay Hian (Hong Kong).

The far-reach­ing im­pact of US in­ter­est-rate in­creases would also cast a shadow next year on Hong Kong’s ini­tial pub­lic of­fer­ing (IPO) mar­ket, which is poised to re­claim its top spot this year, said Ed­ward Au, Hong Kong-based part­ner of au­dit at Deloitte China.

Echo­ing views of its coun­ter­part KPMG, Deloitte said it ex­pects the Hong Kong Stock Ex­change to se­cure the crown of be­ing the world’s lead­ing IPO venue this year. How­ever, the lo­cal stock mar­ket may have to com­pete with its US and Chi­nese main­land peers as the top venue for IPOs.

By yearend, the lo­cal stock mar­ket is pro­jected to at­tract some 120 com­pa­nies, rais­ing funds of up to HK$194.7 bil­lion, com­pared with 124 firms rais­ing HK$262.1 bil­lion in their Hong Kong list­ings last year.

In par­tic­u­lar, list­ings from main­land-based fi­nan­cial ser­vices in­sti­tu­tions con­trib­uted

The far-reach­ing im­pact of US in­ter­est-rate in­creases would also cast a shadow next year on Hong Kong’s ini­tial pub­lic of­fer­ing (IPO) mar­ket, which is poised to re­claim its top spot this year.”

to nearly 70 per­cent of the to­tal funds raised so far — up 53 per­cent from 2015.

Au an­tic­i­pated four to five “size­able” flota­tions in Hong Kong ne xt year, in­clud­ing some in­volv­ing ma­jor fi­nan­cial tech­nol­ogy (fin­tech) en­ter­prises. A greater num­ber of small- and medi­um­sized main­land com­pa­nies is also ex­pected to head south to trade on the Hong Kong bourse.

ROY LIU / CHINA DAILY

Wor­ri­some news about the Chi­nese main­land’s mea­sures to curb cap­i­tal out­flow, as well as ap­pre­hen­sion over the quick­ened pace of US in­ter­est-rate hikes, con­tin­ued to rat­tle the Hong Kong stock mar­ket on Mon­day, with the bench­mark stock in­dex hit­ting a four-month low. Ex­perts said the city’s stock mar­ket would have to brace it­self for more volatile ses­sions in the near fu­ture.

Ed­ward Au, Hong Kong-based part­ner of au­dit at Deloitte China

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