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China stocks lead global losses as tech rout hits fragile market

Nov 20 2018 10:44
Sofia Horta e Costa and Jeanny Yu, Bloomberg

Chinese stocks were the world’s worst performers on Tuesday as they fell the most this month, while Hong Kong’s rebound came unstuck.

The CSI 300 Index slid 2.3%, with technology stocks leading declines after another sell-off in the US. That also dragged on Hong Kong’s Hang Seng Index, which lost 2% as all but one of its 50 members declined.

The tech rout rippled through equity markets across Asia, but none more so than in China, where investors have been stung this year by a myriad of factors, including a trade war with the US that has helped send the equity benchmark down 20%. Uncertainty continues to swirl around the dispute and whether any progress will be made when presidents Xi Jinping and Donald Trump meet on the sidelines of the G20 in Buenos Aires.

“The market was affected by the decline in the US stocks today and people are very cautious before the Trump-Xi meeting in general,” said Linus Yip, a Hong Kong-based strategist at First Shanghai Securities. “People tend to sell once they have had small gains. I would expect the Hang Seng Index to fluctuate between 25 000 and 26 200 in the coming two weeks or so.”

Tuesday’s decline in Hong Kong stocks threatened to derail what had been a dramatic comeback this month. The Hang Seng Index advanced 5.6% in November through Monday, rebounding from its worst streak of monthly losses in 36 years. It was last trading at 25 850 points.

Tencent Holdings slid 3%, while the benchmark’s worst performer was CSPC Pharmaceutical Group after its results on Monday. Analysts still overwhelmingly recommend buying the drug maker.

Traders in Hong Kong have barely had a moment of calm this year. Another decline exceeding 2% on Tuesday would mark the Hang Seng Index’s 15th this year, the most since 2011. Last year, drops of that magnitude happened only twice.

The losses show how most problems afflicting global investors in 2018 have found a foothold in Hong Kong. Its largest companies generate the majority of their sales from a slowing China, while the city’s dollar peg ties it to tightening US monetary policy.

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equities  |  currency  |  markets
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