Hong Kong stocks retreat as yuan’s weakness, ‘trade war’ comment keep investors on edge

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Along with yuan pressure, the market temporarily ‘lacked further momentum” after the Lujiazui financial forum ended, an analyst says

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Cars to be exported sit at a terminal in the port of Yantai, Shandong province, China. Photo: Reuters

Aileen Chuang

Published: 11:06am, 21 Jun 2024Updated: 5:09pm, 21 Jun 2024

Hong Kong stocks declined on Friday as investors were rattled by uncertainties brought on by a weakened yuan, which hit fresh seven-month lows, and geopolitical tensions as China’s commerce ministry spokesman said trade frictions with Europe may trigger a “trade war”.

The Hang Seng Index dropped 1.7 per cent to close at 18,028.52, still finishing the week with a gain of 0.5 per cent. The Hang Seng Tech Index tumbled 1.8 per cent, while the Shanghai Composite Index eased 0.2 per cent, ending the day below 3,000 for the first time since March 27.

The yuan continued to weaken against the US dollar after the People’s Bank of China set the fixing at 7.1196 per US dollar on Friday following the currency’s fall overnight to its lowest since November. The fixing was marginally weaker than Thursday’s 7.1192 per US dollar.

“Depreciation pressure on the yuan will likely remain in the near-term, until there are stronger signals of a broader dollar weakening trend emerging,” said Lynn Song, ING’s chief economist for Greater China.

Along with the yuan pressure, the stock market temporarily “lacked further momentum” after the Lujiazui Forum, which led to an easing of the gains seen on Wednesday, said Kenny Ng, a strategist at Everbright Securities International. At the two-day forum, which ended on Thursday, Beijing officials unveiled some supportive policy measures to reform the capital market and promised to shore up the economy.

Traders are also tracking heightened global trade tensions after reports that Canada planned additional tariffs on Chinese-made electric vehicles on the heels of similar action taken by the US and the European Union. A Chinese commerce ministry statement said if the EU continues to escalate trade frictions it may trigger a “trade war”.