Hong Kong Hang Seng finishes 0.2% lower

Headline shares of the Hong Kong share market closed down on Thursday, 05 July 2018, with investor sentiment dampened by sluggish Chinese stocks amid growing concern over U.S.-China trade friction. Market losses were limited as investors opted a wait-and-see mood ahead of the implementation of additional U.S. tariffs on Chinese imports on Friday. Trading was also generally lackluster after the U.S. market was closed Wednesday for the Independence Day holiday. At the close of trade, the Hang Seng Index dropped 59.58 points or 0.21% to 28,182.09. The Hang Seng China Enterprises Index declined 104.58 points or 0.98% to 10,608.06. Turnover decreased to HK$89.1 billion from HK$133 billion on Tuesday. Turnover increased to HK$93.4 billion from HK$89 billion on Wednesday.

China markets have taken a hit ahead of the Friday deadline, with the benchmark Shanghai composite last week falling into bear market territory, referring to a drop of at least 20% from recent highs.

The United States is due to impose the tariffs on US$34 billion worth of Chinese goods on July 6. China's customs department informed markets on Thursday that China's retaliatory tariffs on US goods will take effect immediately after US tariffs on Chinese imports kick in. The Trump administration has levied a 25% tariff on $34 billion in Chinese goods, while the Chinese government has retaliated by announcing tariffs on the same value of U.S. goods.

Shares of banking players were higher as liquidity inflow of around 700 billion yuan into system due to targeted cut of reserve requirements for banks took effect. Chinese banks were firmer, with CCB (00939) adding 1% to HK$7.12. ICBC (01398) gained 1.1% to HK$5.53. BOC (03988) put on 0.9% to HK$3.68. ABC (01288) was unchanged at HK$3.57.

Mainland developers rebounded after yesterday's slump. Shimao Property (00813) jumped 4.7% to HK$19.78 on an 83% sales growth for June. China Resources Land (01109) edged up 0.6% to HK$25.25. China Vanke (02202) shot up 2.2% to HK$25.65. Country Garden (02007) rose 2% to HK$12.98 as it reported 43% sales growth for 1H.

OFFSHORE MARKET: US share markets were closed on Wednesday for the Independence Day holiday. European share markets were mixed on Wednesday. The pan-European STOXX600 index closed flat. But the German Dax and UK FTSE indexes both fell by 0.3%.

COMMODITY NEWS: Crude oil prices rose on Wednesday, driven higher by a decline in US crude inventories and rising Iranian supply risks. US crude inventories fell by 4.5 million to 416.9 million barrels over the week to June 29. And Iranian President Hassan Rouhani hinted that his country may disrupt regional crude oil exports if the US followed-through with sanctions against Iran's oil sales. Brent crude rose by US48 cents or 0.6% to US$78.24 a barrel and the US Nymex (unsettled due to the US public holiday) rose by US19 cents or 0.3% to US$74.33 a barrel.

Base metal prices were mostly lower on the London Metal Exchange (LME) on Wednesday ahead of expected new trade tariffs from the US on Friday. Zinc (-3.2%) fell to near one year lows. Copper (-1.5%) was near 11-month lows. Producer Freeport-McMoran was granted an extension of a temporary operating permit at its Grasberg mine, likely boosting copper supplies. Aluminium rose by 0.9%.

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