January 2, 2019 / 8:44 AM / 9 months ago

Hong Kong shares end lower as China manufacturing activity shrinks

* Hang Seng index ends down 2.77 pct

* China Enterprises index HSCE falls 2.87 percent

* HSI financial sector sub-index is 2.6 percent lower; property sector down 3.2 percent

Jan 2 (Reuters) - Hong Kong shares slumped in the first trading day of 2019 as investors digested disappointing data out of China that showed a contraction of manufacturing activity in December, adding to concerns over trade and an economic slowdown.

** At the close of trade, the Hang Seng index was down 2.77 percent at 25,130.35 points, after posting its biggest daily percentage loss since Oct. 23. The Hang Seng China Enterprises index fell 2.87 percent to 9,833.69. ** The sub-index of the Hang Seng tracking energy shares ended 4.4 percent lower, while the IT sector closed 2.85 percent weaker, the financial sector ended 2.57 percent lower and the property sector closed 3.22 percent down. ** China’s factory activity contracted for the first time in 19 months in December as domestic and export orders continued to weaken, a private survey showed Wednesday. ** Wednesday’s data came after China’s official Purchasing Managers’ Index (PMI) fell to 49.4 in December, below the 50-point level that separates growth from contraction. It was the first contraction in more than two years, highlighting the challenges facing Beijing as it seeks to end a bruising trade war with Washington and reduce the risk of a sharper economic slowdown in 2019. ** “We believe the data reflects that not only has the trade war damaged growth in the export sector, it has also hurt export-related supply chain companies and in turn, domestic demand,” analysts at ING said in a note Wednesday. ** “If domestic demand is not supported by fiscal stimulus quickly, then further weakening will pose a risk to job security. That could create a vicious downwards cycle. As a result, we expect the Chinese government to speed up the delivery of infrastructure investment to support the economy, which will mainly be through projects governed by local governments, e.g. new metro lines,” the analysts said. ** The top gainer on the Hang Seng was Hong Kong and China Gas Co Ltd, which ended 0.37 percent firmer, while the biggest loser was CNOOC Ltd, which closed 6.45 percent lower. ** China’s main Shanghai Composite index closed down 1.15 percent at 2,465.29 points, while the blue-chip CSI300 index ended down 1.37 percent. ** Around the region, MSCI’s Asia ex-Japan stock index was weaker by 1.9 percent, while Japan’s Nikkei index closed down 0.31 percent. ** The yuan was quoted at 6.8509 per U.S. dollar at 0826 GMT, 0.32 percent firmer than the previous close of 6.873. ** About 1.72 billion Hang Seng index shares were traded, roughly 122.1 percent of the market’s 30-day moving average of 1.41 billion shares a day. (Reporting by Andrew Galbraith, Editing by Sherry Jacob-Phillips)

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