Hong Kong Stock Volatility Drops to One-Month Low Before Fed

  • Sunac China falls most since January after placement plan
  • Market getting cautious after recent rally: KGI Asia analyst

A measure of swings in Hong Kong’s stocks receded to a one-month low, with the benchmark equity gauge closing little changed as investors awaited the outcome of a Federal Reserve meeting.

The Hang Seng Index finished at 26,852.05 after moving 0.2 percent in both directions during the day. A measure of expected volatility fell to 11.5, the lowest since June 9 and near a level not seen since 2005. AAC Technologies Holdings Inc. was among the biggest gainers after saying it hadn’t disclosed any profit forecast figures during an analyst site visit. Sunac China Holdings Ltd. retreated the most since January after announcing a plan to sell shares.

Hong Kong stocks are calm ahead of a Federal Open Market Committee meeting July 25-26 in Washington. Inflows from the mainland have helped the city’s benchmark equity gauge climb 22 percent this year to outperform most global peers. Onshore shares have largely been left behind amid concerns about rising funding costs, corporate governance issues, liquidity pressures and tougher regulatory oversight. The Hang Seng Index closed at a two-year high on Monday.

“Investors are standing on the sidelines ahead of the FOMC meeting as the recent rally has made many stocks a bit expensive to buy," said Ben Kwong, executive director at KGI Asia Ltd. in Hong Kong. “The market is getting a little bit cautious.”

China’s top leadership has called for policy consistency and stability to create a “favorable environment" for the 19th Party Congress in the fall, the Communist Party Politburo said on Monday after a meeting chaired by President Xi Jinping, according to the state-run Xinhua News Agency. The nation needs to properly address local government debt problems, the statement said.

  • Sunac China fell 7.5% after saying it plans to sell stocks in a share placement at HK$18.33 each, which would be an almost 9% discount to Monday’s closing price of HK$20.10.
  • Chinese film and TV drama producers climbed on inflows driven by sector rotation, according to CICC analyst Yin Pei. Beijing Enlight Media Co. rose 3.9% while Huayi Brothers Media Corp. surged 7%, the most since March 2016.
  • China Coal Energy Co. fell 3.9% in Hong Kong after the company’s first half net guidance came in below estimates. The decline in second-quarter profit may be due to lower coal prices for long-term contracts and higher costs, Essence Securities Co. analyst Heng Kun wrote in a note dated Tuesday.
  • The Hang Seng Properties Index retreated 0.6% for its biggest drop since July 4.
  • AAC Technologies added 1.4% after tumbling 11.7% on Friday, the most in seven years, after analyst notes cited a second-quarter revenue warning.
  • Shenzhen Das Intellitech Co. dropped 7.6%, set for its biggest loss in a year, after saying some of its holders plan to sell shares.
  • Hangzhou Century surged by the 10% daily limit after disclosing it has been in contact with Alibaba Group to explore opportunities in retail industry.
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