Hong Kong stocks erase gains to end flat with China growth fears inflicting monthly loss

China’s higher cap for duty-free shopping by mainland visitors to Hong Kong triggered consumption optimism but growth doubts saw investors hitting the exits

Hong Kong stock market

Zhang Shidongin Shanghai

Published: 11:13am, 28 Jun 2024

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Hong Kong stocks reversed gains posted after China relaxed the duty-free shopping limits for mainland tourists to the city and ended flat as investors remained cautious about growth prospects in the world’s second-biggest economy which forced the benchmark into its first monthly loss since January.

The Hang Seng Index gained less than 0.1 per cent to 17,718.61 at the close. Still the benchmark lost 2 per cent in June and capped its first monthly loss in five months. The Hang Seng Tech Index slid 1 per cent and the Shanghai Composite Index rose 0.7 per cent.

Early in the day, sentiment had turned upbeat after China’s commerce ministry said the cap for duty-free shopping by mainland tourists entering Hong Kong and Macau would be raised to 12,000 yuan (US$1,651) from 5,000 yuan. The relaxation is expected to bring additional consumption of as much as HK$17.6 billion (US$2.3 billion) to the city every year, according to the Hong Kong government.

Online travel agency Trip.com Group gained 0.3 per cent to HK$374.60. Among other leading gainers, China Unicom advanced 3.6 per cent to HK$7.17 and BYD Electronic climbed 3.3 per cent to HK$39.

For the month, sentiment towards stocks soured as investors flocked to the safety of government bonds, amid lack of conviction about a pickup in China’s economic recovery. The latest set of data showed a deceleration of profit growth for industrial companies, falling foreign direct investment and declines in home prices. Overseas investors have pulled US$5 billion out of Chinese onshore stocks in June, the largest monthly outflow since October, according to HSBC.

“As we have seen, most sectors haven’t had a noticeable improvement in earnings,” said Fan Jituo, an analyst at Cinda Securities. “For the next two months, the market will take a breather and trade sideways. For this to change, it calls for a pickup in earnings and inflows of fresh capital.”

Shares of three-quarters of the 82 members on the Hang Seng Index have retreated in June, with Xinyi Solar Holding, auto dealer Zhongsheng Group Holdings and Haidilao International Holdings being the worst performers with declines of at least 19 per cent.

Three companies started trading on Friday. Laopu Gold, a jewellery retailer, jumped 73 per cent from its initial public offering (IPO) price to HK$70, while Tianju Dihe Technology, a provider of application programming interface service, slid 28 per cent to HK$60.15 after rising as high as HK$117.20, and Dida, a ride-hailing platform operator, slumped 23 per cent to HK$4.65.

Funds raised from the IPOs in Hong Kong dropped to a two-decade low in the first half, pushing the city down to 13th place in global rankings, according to data compiled by the London Stock Exchange Group. A total of 27 companies raised US$1.5 billion from the offerings in the period, it said. The performance is in sharp contrast with the past, when Hong Kong was the world’s top IPO destination for seven of the past 15 years.

Meanwhile, traders awaited data on US personal consumption expenditure due Friday night, a measure of inflation preferred by the US Federal Reserve. It probably increased 2.6 per cent from a year earlier in May, slowing from a 2.7 per cent increase for the previous month, according to the consensus estimate of economists tracked by Bloomberg.

Other major Asian markets were broadly higher. Japan’s Nikkei 225 climbed 0.6 per cent in a breakout of a two-month rangebound pattern, while South Korea’s Kospi rose 0.5 per cent and Australia’s S&P/ASX 200 added 0.1 per cent.