Hong Kong Market falls on falling hopes of Fed rate cut

The Hong Kong share market declined for fourth day in row on Monday, 08 July 2019, as profit taking continued after solid US non-farm payrolls data dampened market expectations the Federal Reserve would cut rates more than twice this year. At closing bell, the Hang Seng Index declined 1.54%, or 443.14 points, to 28,331.69. The Hang Seng China Enterprises Index was down 1.56%, or 169.90 points, to 10,725.20.

The U.S. jobs report showed the economy stateside added better than expected 224,000 jobs in June, following a dismal jobs print in May. The solid US payrolls report dampened Fed rate cut expectations and severely dented the argument for a 50bps rate cut by the end of the month.

Investors are now awaiting Fed Chairman Jerome Powell's semiannual testimony to the U.S. Congress on Wednesday and Thursday for more cues on possible rate cuts by the end of July. It is probable that the Fed will now cut rates by 0.25 percentage point instead of the aggressive market anticipation for a 0.5 percentage point cut in July.

On Friday, the Fed emphasized it would act as necessary to sustain the economic expansion, while noting most Fed officials have lowered their expectations for the course of rates. The Fed's statement came in its semiannual report on monetary policy.

Before the Fed's end-July policy review, some China watchers will also shift their focus to a meeting of the Politburo - a top decision-making body of China's ruling Communist Party - where the current economic situation will be discussed.

Blue chips fell across the board. HSBC (00005) fell 0.7% to HK$65. HKEX (00388) dipped 1.5% to HK$274.2. Tencent (00700) shed 2.5% to HK$351. China Mobile (00941) shed 0.9% to HK$70.3. AIA (01299) declined by 2% to HK$84.55. Sands China (01928) nudged up 0.4% to HK$38.9.

Property counters bore the brunt of selling on lower rate cut odds. Wharf REIC (01997) sank 2.7% to HK$53.5. Its parent Wheelock (00020) dipped 1.9% to HK$55.75. Henderson Land Development (00012) dropped 2.2% to HK$43.05. Sun Hung Kai Properties (00016) slid 1.5% to HK$134.5. Swire Properties (01972) lost 2.2% to HK$30.95. Kerry Properties (00683) decreased 1.9% to HK$33.15. New World Development (00017) dwindled 2.1% to HK$12.38. Hang Lung Properties (00101) skidded 1.9% to HK$18.84. CK Asset (01113) waned 1% to HK$61.2.

Chinese entertainment company Camsing International Holding (2662 HK) plummeted by 80%, after the company said its chairwoman and 62.8 per cent shareholder, Lo Ching, has been arrested in Shanghai. The company is unable to ascertain the reasons of, or incidents leading to, the criminal custody, according to the stock exchange filing.

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