Hong Kong stocks give up earlier gains to close lower as mainland Chinese traders’ sell-off of local shares dampens sentiment

Hong Kong stocks dropped on Tuesday, reversing earlier gains, as a sell-off by mainland Chinese investors offset a boost provided by the strength of the Chinese yuan as it rose to a four-month high.

The Hang Seng Index fell 0.3 per cent to 17,733.89 at the close, giving up an intraday gain of as much as 1.6 per cent. The Tech Index slid 1 per cent and the Shanghai Composite Index slipped less than 0.1 per cent.

Chinese smartphone maker Xiaomi retreated 4.9 per cent to HK$15.38 and personal computer maker Lenovo Group sank 3.4 per cent to HK$9.52. Tencent lost 0.6 per cent to HK$324.80 and online games operator NetEase shed 2 per cent to HK$179.60.

Limiting losses, Alibaba Group advanced 2.1 per cent to HK$76 and search engine operator Baidu jumped 2.8 per cent to HK$107.40, with analysts forecasting its earnings report today may show a 6.6 per cent increase for the last quarter.

Sunac China Holdings jumped 12 per cent to HK$2.61 after the Chinese property developer said it had satisfied conditions for a long-awaited offshore debt restructuring deal.

Chinese onshore investors sold HK$2.44 billion (US$313 million) of Hong Kong stocks via the exchange link today, extending net sales of HK$6.11 billion yuan on Monday, according to data compiled by the city’s exchange.

“After the excitement about all the policy support, investors are back to the fundamentals and have realised that the recovery in the economy is a zigzagging one,” said Yao Pei, an analyst at Huachuang Securities. “A consolidation pattern is expected for stocks in the short term.”

The uneven recovery fuelled skittish sentiment. While retail sales and industrial production both exceeded estimates in October, declines in property investment and sales deepened, and consumer and producer prices fell. Nomura Holdings expects China’s growth to decelerate to 3.9 per cent next year and Morgan Stanley forecast a 4.2 per cent growth rate, compared with an estimated 5 per cent expansion this year.

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The yuan appreciated 0.5 per cent to 7.1334 against the US dollar, its sixth straight daily gain. The central bank set the daily reference at 7.1406, compared with expectations of 7.1682 among traders in a Bloomberg survey. The yuan had slumped last month to a 16-year low.

Thirty Hang Seng Index members have released their third-quarter results, posting an average of 7.5 per cent year-on-year earnings growth, according to Bloomberg data. That compares with a 7.7 per cent growth in first-half earnings. Baidu will report later today and Hong Kong jewel retailer Chow Tai Fook Jewellery Group will release its result on Thursday.

In Shanghai, liquor giant Kweichow Moutai advanced 1.6 per cent to 1,790 yuan after proposing a special dividend payment totalling 24 billion yuan (US$3.4 billion).

Major Asian markets were mixed. Japan’s Nikkei 225 slipped 0.1 per cent, while South Korea’s Kospi rose 0.8 per cent and Australia’s S&P/ASX 200 added 0.3 per cent.

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