Nikkei loses early gains, Hong Kong slips on China economic worries
Global stock markets were broadly lower in Asia on Monday, despite record gains on Wall Street, with Hong Kong lagging behind the region as China-related firms pulled back.
The Hang Seng Index was down 0.6% in afternoon Asian trade, after falling about 1.5%, amid declines in Chinese financial and property stocks. The Hang Seng China Enterprises Index, which tracks the movement of Chinese companies, known as H-shares, was down 1.1%.
Investors were taking profit amid comments from China's central bank governor Zhou Xiaochuan about rising risks to China's financial system, said Ivan Ip, a stocks strategist at UOB Group. The news reignited worries of a crackdown on leverage on the mainland, he said.
Zhou wrote in an article, posted Saturday on the website of the People's Bank of China, that the risks of China's financial system are increasing. He described the risks as being "hidden, complex, sudden, contagious and hazardous."
Meanwhile, political unrest in Saudi Arabia also added to investor jitters in Hong Kong, following a corruption crackdown that resulted in a wave of arrests by the Saudi authorities of royals and cabinet ministers.
"Hong Kong didn't get a chance to respond to the situation over the weekend [and] everything risky in the overseas market affects Hong Kong more than in other Asian markets," said Hao Hong, head of research at BOCOM International.
Shares of banking giants ICBC (601398.SH) and China Construction Bank (0939.HK) fell about 2% each. Among developers, China Evergrande (3333.HK) and China Vanke declined more than 4.5% and 3% respectively.
Meanwhile, news that Qatar Airways was buying a 9.6% stake in Hong Kong's Cathay Pacific (0293.HK) came as a major surprise to the market as well as to the Asian airline. Cathay, in a brief statement, said it was looking to continue its constructive relationship with the Qatar carrier. However, it asserted Swire Pacific (0019.HK) and Air China (0753.HK) still control nearly 75% of the airline. Qatar bought the Cathay stake from Kingboard Chemical, which has been amassing shares in the airline for some time.
Nonetheless, investors were clearly concerned about a company known for its ownership stability, with shares down as much as 5%.
Elsewhere in the region, Japan's Nikkei Stock Average pared earlier gains, as traders returned after a three-day weekend. The yen's decline steepened against the U.S. dollar, last down 0.3%, as Bank of Japan Gov. Haruhiko Kuroda said the central bank would be patient about easing.
Still, the weaker yen drove Japanese export shares higher, with Fast Retailing (9983.TO) rising 1.5%, Honda Motor (HMC) up 1.2%, and Suzuki (7269.TO) rising 0.5%.
The dollar was also broadly higher against regional currencies in early trade, following Friday's improvement in U.S. employment data. The WSJ Dollar Index was last up 0.1%.
After strong earnings results for Apple (AAPL) helped key U.S. stock indexes close at fresh records Friday, the mood was less sanguine in Asia, with investors showing caution as U.S. President Donald Trump's regional visit continued. Though observers weren't expecting implications for financial market.
An early lift for Asian technology stocks dissipated, and technology hub Taiwan's main Taiex reversed gains to trade down 0.1%. Korea's Kospi was down 0.6%, the Shanghai Composite was off 0.1%, while both New Zealand's NZX50 and Australia's S&P/ASX 200 fell about 0.2%.
Financial stocks were a key point of weakness across the region, as expectations for a rise in U.S. interest rates in December rose after employment data showed the jobless rate hit a 17-year low in October.
Japan's Topix bank subindex fell 2.2%, while Australia's big four heavily-weighted banks traded lower. Westpac Banking (WBK) led the declines there, down 2.3% after disappointing earnings.
"On headline numbers alone there seems little to inspire and that will disappoint the index bulls, given the ASX financial sector is failing to contribute to the ASX rally," said Chris Weston, chief market strategist at IG Group.
Oil prices started the week modestly higher, building on Friday's gains helped on by fresh drilling-activity declines in the U.S., and the latest developments in Saudi Arabia.
Brent, the global benchmark, was up 19 cents at $62.26 a barrel, while Nymex rose 14 cents to $55.78 a barrel.
(END) Dow Jones Newswires
November 05, 2017 23:37 ET (04:37 GMT)