Hong Kong shares let go of early gains to end lower for a sixth straight day on Tuesday as concern about the yuan and global economic growth lingered.

The Hang Seng Index ended 0.1% lower at 26,172.91 after trading higher for most of the day. Stock heavyweights weighed on the performance, with social-media company Tencent Holdings losing 1.7%, insurer AIA Group shedding 0.9% and banking major HSBC Holdings falling 0.6%.

Geely Automobile Holdings tumbled 5.2% after reporting a 14% year-on-year increase in September sales volume to 124,429 units, compared with the 42% growth rate it saw in September 2017.

Energy sector shares were among the gainers, with China Shenhua Energy and CNOOC added 2.2% and 2.1%.

The International Monetary Fund on Tuesday cut its global growth forecast to 3.7% for this year from an April prediction of 3.9%, citing worries over the Sino-American trade tensions. Concerns over emerging market assets and fund outflows have also mounted recently amid rising U.S. government bond yields and a strengthening dollar. While the People’s Bank of China cut the reserve requirement ratio for most lenders over the weekend to ease cash shortages in the system, the move has dragged the yuan down.

The yuan traded onshore, which slumped 0.9% on Monday, was up 0.2% at 6.9178 against the U.S. dollar on Tuesday.

“The Hong Kong stock market is still facing an overhang from the yuan’s depreciation. A strong rebound will need a strengthening yuan,” said Jason Lee, vice president for stocks at Hong Kong consultancy Investment Strategy Institute. Having lost some confidence recently, investors were “hesitating to enter” the market, he added.

The Hang Seng China Enterprises Index of large mainland companies listed in Hong Kong rose 0.3%. In the mainland, the Shanghai Composite edged up 0.2% after suffering its worst single-day drop since June on Monday, when markets reopened after the weeklong National Day holiday.

While the PBOC’s RRR cut was “a welcome relief for banks,” the move in itself was unlikely to change the business strategy or risk appetite at the top state-owned commercial banks, S&P Global Ratings said in a statement.

“In our view, this would require additional measures and incentives to encourage banks to increase their exposure to small businesses, private enterprises, and innovation sectors,” the ratings agency said.

Guangzhou R&F Properties added 2.9% following a 39% increase in contracted sales for September to 10.28 billion yuan ($1.49 billion).

China SCE Property Holdings gained 1.1% after also reporting a 39% increase in contract sales for last month.

China Machinery Engineering rose 1.1% after saying it won a contract worth about $97 million in Bolivia for the construction of a carbonate lithium plant.

Electronics components trader Willas-Array Electronics (Holdings) tumbled 5.7% after saying it expects consolidate net profit for the six months ended Sept. 30 to have decreased significantly.

By Amy Lam
Nikkei Asia

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