Hong Kong stocks fall, China opens flat as investors hold fire ahead of trade war truce deadline

China’s benchmark stock indexes were trading flat on Tuesday morning after starting the Lunar New Year strong on Monday, while Hong Kong shares opened lower.

Traders said that after the rebound enjoyed by both the China and Hong Kong bourses so far this year, investors had recoiled from making further big bets ahead of news from US-China trade negotiations in Beijing later this week.

The Hang Seng Index opened down 0.41 per cent, or 115.2 points, at 28,028.66.

“The Hang Seng Index has risen by as much as 3,000 points from the low seen in early January, [so] it would take further positive triggers to drive the benchmark index higher,” said Alvin Cheung, associate director at Prudential Brokerage.

“Given the March deadline for the US and China trade truce will expire imminently, I don’t think traders have a lot of incentives to make big bets on the index either way.”

On Thursday and Friday, Chinese vice premier Liu He and central bank governor Yi Gang will meet with US trade representative Robert Lighthizer and Treasury Secretary Steven Mnuchin. The market is hoping these meetings will at least yield a potential extension of the March 1 deadline, when US tariffs on Chinese imports are set rise from 10 per cent to 25 per cent on goods worth US$200 billion.

On Tuesday, MSCI announced that Xiaomi, China’s leading smartphone maker, and group-buying platform Meituan Dianping are among the nine additions to the MSCI China All Shares Index, which is part of the index provider’s quarterly index review.

The news did not prompt further buying of Xiaomi shares, which dropped 0.56 per cent to HK$10.64. Meituan Dianping was down 3.21 per cent at HK$60.4.

In China, the CSI 300 index, which tracks blue chips listed on both the Shanghai and Shenzhen exchanges, was trading flat, down 0.12 per cent, or 3.8 points, at 3,302.65

The Shanghai Composite Index was down 2 points, or 0.07 per cent, at 2651.87, while the Shenzhen Component Index edged up 0.34 per cent, or 27.19 points, to 2946.24.

You thought 2018 was bad for China’s stock market? Profit warnings suggest worse may be yet to come

Earlier this week, the China Business News reported that some 390 companies listed on China bourses are set to report a combined loss to the tune of 330 billion yuan for 2018, potentially pushing the total loss for the country’s listed firms to three times higher than a year ago.

Market observers are currently split on the outlook for the so-called A-share market, as the record inflow into mainland China-listed equities in January signalled growing confidence from foreign investors about the outlook for what was the worst stock market globally last year. Foreign investors invested US$9 billion into Chinese equities in January.

“The Chinese government are trying to tackle the slowdown in the economy on two fronts. One is through bolstering internal consumption, as can be seen from the government’s consumption stimulus measures recently,” said Cheung.

“The other is through infrastructure investment to support growth of the GDP. But the billion dollar question is still how sustainable and effective would these measures be over the longer term?”

He said corporate profit warnings were likely to weigh on the Chinese stock market performance in the near term.

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