U.S. markets close in 2 hours 17 minutes

Hang Seng Bank sees biggest fall in 2 months as economic weakness, virtual banks weigh on banking outlook

By Deb Price and Martin Choi

Banking stocks helped drag down Hong Kong's Hang Seng Index Wednesday after Morgan Stanley warned they are vulnerable to the city's economic slowdown and the rise of virtual banks.

Hang Seng Bank " the second worst performer on the Hang Seng " closed down 3.3 per cent to HK$159.80. That was its biggest percentage fall in more than two months, following its 3.6 per cent decline on August 5.

HSBC slid 0.56 per cent to HK$58.10 and Standard Chartered fell 0.9 per cent to HK$61.05. The three banks were dropped to underweight/cautious.

"In the past, the tourism and retail sectors as well as shopping malls took the brunt of the protests. Now investors seem to be worried about the state of the Hong Kong economy, and may be cautious towards the performance of the banking sector," said Stanley Chan, director of research at Emperor Securities. "The weakening interest rate environment also does not bode well for bank stocks."

The Hang Seng finished the day down 0.8 per cent at 25,682.81.

First virtual general insurance licence goes to Avo as Insurance Authority promotes insurtech in Hong Kong

That contrasted with the mainland, where the Shanghai Composite Index closed up 0.39 per cent to 2,924.86, while the CSI 300 of leading stocks traded in Shanghai and Shenzhen gained 0.14 per cent to 3,843.24.

But the stingy gains hinted at the caution investors feel, as trade negotiations set to begin on Washington's Thursday have already been talked down by both sides. In the run-up to the talks, the US blacklisted some of China's biggest surveillance camera makers, citing alleged abuses of Muslim minorities, sparking outrage by Beijing.

"The overall market sentiment in Hong Kong and China is still weak, and nobody knows if the situation could get worse. Most investors will continue to wait and see as it's not the right time yet,"

said Gordon Tsui Luen-on, managing director of investment company Hantec Pacific. "Transaction volumes are still really low, and there isn't much desire to go against the market just yet."

In China, 11 hit or nearly hit the 10 per cent upside limit, including Sino-Agri Leading Biosciences, a fertiliser and pesticide maker, Sobute New Materials, a concrete products maker, and GuangDong GenSho Logistics, which transports and warehouses automotive parts.

US-China trade war may have 'milder than feared' effect on global growth, Fidelity says

Several Chinese stocks popular with northbound traders saw losses.

Liquor giant Kweichow Moutai fell 1.7 per cent to 1,146.81 yuan. Gree Electric, China's biggest maker of air conditioners, dropped 1.9 per cent to 57.02 yuan. And Pig breeder New Hope Liuhe " up nearly 200 per cent over the past 12 months " fell 0.2 per cent to 17.96 yuan.

In Hong Kong, index heavyweight Tencent slid on the heels of its decision to suspend broadcasts of NBA basketball preseason games after a tweet by the Houston Rockets' team manager in support of Hong Kong protesters.

"Increasing fallout from Houston Rockets' GM's tweet supporting Hong Kong protests may cost Tencent its 490 million users who view the sport on its platforms," Bloomberg Intelligence analysts wrote.

Stocks Blog: Hang Seng Bank, other banks fall in Hong Kong on Morgan Stanley downgrades

Citigroup, Bloomberg reported, said the move to suspend the NBA broadcasts "will pose financial impact to Tencent," although it didn't specify by how much.

Budweiser Co. APAC " which has run up nearly 19 per cent in just over a week since it debuted in Hong Kong " closed up 2.8 per cent at HK$32.50.

Property stocks " which have suffered due to a decline in foot traffic at malls and at flat sales " were among the big losers, led by Link REIT, which fell 2.76 per cent to HK$83. Others that fell included Swire Pacific, down 2.6 per cent to HK$70.25, CK Asset Holdings, down 1.9 per cent to HK$51.25, and MTR, which fell 0.9 per cent to HK$43.20.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2019 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.