Most Hong Kong Stocks Decline Before Central Bank Meetings

  • Turnover on Hong Kong exchange 26% below a 30-day average
  • Gauge of casinos heads for steepest two-day drop since July

What Can We Expect From the BOJ's Next Move?

Most Hong Kong stocks fell on thin trading volume before policy reviews from the Bank of Japan and the Federal Reserve. Casinos and property developers led declines.

The Hang Seng Index slipped 0.1 percent at the close, with four stocks falling for nearly every three that rose on the gauge. Turnover on the exchange was 26 percent below a 30-day average for the time of day before policy decisions from two of the world’s most influential central banks over the next couple of days. A gauge of Macau casino operators posted its biggest two-day loss in more than two months, paced by Sands China Ltd. Hang Lung Properties Ltd. retreated 1.2 percent.

Hong Kong stocks have been whipsawed in recent days by speculation over whether central banks will add to stimulus, with the benchmark gauge plunging the most in three months last week as traders boosted bets for higher interest rates in the U.S. The Hong Kong dollar is pegged to the greenback, meaning borrowing costs in the city follow those in the U.S.

“The major concern for the market is the Fed meeting and investors are turning cautious before that,” said Linus Yip, a strategist at First Shanghai Securities Ltd. “If an interest-rate hike is the case, the market may have some correction, given it has shot up over the past few months. Developers are interest rate-sensitive stocks, they are facing pressure.”

While the probability traders assign to a Fed rate increase in September has halved to 20 percent since late August, the odds of a rise in borrowing costs by the end of this year are more than even, data compiled by Bloomberg show. The BOJ has been studying the effectiveness of its stimulus programs and economists are split over the likelihood of further easing on Wednesday.

The Hang Seng Index slipped to 23,530.86, while the Hang Seng China Enterprises Index of mainland companies traded in Hong Kong added less than 0.1 percent. Momentum indicators on the two gauges had risen earlier this month to levels seen as overbought by some traders after a rally turned Hong Kong equities into Asia’s best performing in the month through Sept. 9. The Shanghai Composite Index slipped 0.1 percent at the close.

Southbound Purchases

Net purchases of Hong Kong stocks by mainland investors through the Shanghai trading link were nearly 4.3 billion yuan ($639 million) on Tuesday. Net buying via the connect had reached the highest since April 2015 on Sept. 9 as cheaper valuations of dual-listed shares in Hong Kong lured investors.

Hong Kong Exchanges & Clearing Ltd. gained 1.5 percent after Goldman Sachs Group Inc. raised the stock’s rating to neutral from sell, citing increased volumes and the recent price rally.

Sands China Ltd. fell for a second day from a one-year high. A Bloomberg Intelligence gauge of large casino stocks declined 2 percent, taking a two-day loss to 3.4 percent. Channel checks show Macau’s gross gaming revenues are weaker than expected so far this month, Vitaly Umansky, an analyst at Sanford C. Bernstein & Co., wrote in a note.

Cheung Kong Property Holdings Ltd. retreated 1.3 percent. Hong Kong home prices are expected to drop 7 percent next year because of increased supply and slower economic growth, Nicole Wong, regional head of property research at CLSA Ltd., said at a conference.

Xinjiang Guotong Pipeline Co. and Inner Mongolia M-Grass Ecology & Enviroment Group Co. gained at least 2.9 percent, as infrastructure-related companies advanced in mainland trading. The Ministry of Finance has selected about 1 trillion yuan ($150 billion) worth of additional public-private partnership projects to prop up the economy, people familiar with the matter said.

— With assistance by Shidong Zhang

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