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The Week in Numbers: Hong Kong Stocks Slump

Hong Kong stocks declined for the 10th straight trading day on Tuesday. Although the Hang Seng index recovered slightly towards the end of the week, it is still some 13% below its peak recorded earlier this year.

The last time Hong Kong stocks suffered such a long losing streak was more than 25 years ago back in 1984. Hong Kong business confidence has been strained by the trade war, widespread protests and dampening tourism and spending.

Meanwhile, China’s central bank has set its yuan fixing at weaker than seven yuan per US dollar for the first time in more than a decade. The People’s Bank of China set its daily reference rate at 7.0039 per dollar.

This has been a retaliation to the US slapping an additional 10% tax on US$300 billion worth of Chinese imports.

The US has officially labelled China a currency manipulator, a claim that has been rejected by the People’s Republic of China.

More countries have responded prophylactically, with New Zealand, India and Thailand all making surprise interest-rates cuts on Wednesday. New Zealand cut its interest rates by 50 basis points, more than the 25 basis points than was expected by most economists.

In a knock-on effect to New Zealand’s rate cuts, the Australian Dollar has plunged to near an 11-year low against the Singapore dollar.

The Australian dollar dived to 0.9246 against our local currency, a level not seen since 2008. Year-to-date, the Australian dollar has dropped 3% against the Singapore currency.

The New Zealand interest rate cut has put pressure on the Reserve Bank of Australia to cut rates further after it reduced its benchmark rate to 1% in July.

Investors have flocked to gold as yields drop and the risk of recession escalates. Gold Future rallied to US$1,500 an ounce on Wednesday, August 7. The precious metal rose to its highest level since 2013. Year-to-date, gold has risen 17%.

Other factors that could have increased demand for Gold, historically considered a “safe-haven” asset could be the potential for a no-deal Brexit and tensions between Iran and the US.

On a more positive note, China reported an unexpected growth in exports in July despite escalating US trade pressure.

July exports rose 3.3% from a year ago, the fastest since March this year. However, imports remained weak, dropping 5.6% from the corresponding period last year.

In total, China had a trade surplus of US$45.06 billion last month, compared with a trade surplus of US$50.98 billion in June.

Back home, retail sales dropped for the fifth consecutive month in June. Retail sales plunged 8.9% compared to June last year, below average analysts estimate of 3.7%. Sales of motor vehicles pulled the figure down, declining 32.4% in June. Sales of furniture and household equipment also fell 15.1%.

Excluding motor vehicles, retail sales declined 2.7% from a year ago. Total retail sales volume was about S$3.5 billion, with online retail accounting for 5.5% of that total.

Lastly, shipbuilding group Yangzijiang Shipbuilding Holdings Ltd (SGX: BS6) asked for a trading halt on Thursday 8th of August, after shares of the company tumbled 20% within the first three hours of trading. Earlier this week, it posted a net profit of 936 million yuan (S$183.6 million) down 6% from a year ago.

The group has yet to make public its answers on queries about compliance with the listing rules.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Jeremy Chia does not own shares in any companies mentioned.