Hong Kong Market falls on IMF downgrade, U.S.-EU trade concerns

Hong Kong share market closed down on Wednesday, 10 April 2019, as risk sentiments hurt by following soft lead from Wall Street overnight after the International Monetary Fund cut its global growth forecasts and as tensions over tariffs between the United States and Europe escalated after U.S. President Donald Trump said taxes on imports from the European Union could be expanded. At closing bell, the Hang Seng Index declined 37.93 points or 0.13% to 30,119.56. The Hang Seng China Enterprises Index fell 51.00 points or 0.43% to 11,764.00. Turnover decreased slightly to HK$112.6 billion from HK$114.2 billion on Tuesday.

Market participants appetite for risk assets were subdued after the International Monetary Fund (IMF) cut its forecast for world economic growth this year, saying the global economy is slowing more than expected and that a sharp downturn could require world leaders to coordinate stimulus measures. The world economy will grow 3.3% this year, down from the 3.5% the IMF had forecast for 2019 in January, the fund said Tuesday in its latest World Economic Outlook. The 2019 growth rate would be the weakest since 2009, when the world economy shrank. It's the third time the IMF has downgraded its outlook in six months. The global volume of trade in goods and services will increase 3.4% this year, weaker than the 3.8% gain in 2018 but reduced from the IMF's January estimate of 4%, the fund's report showed.

The IMF cut its forecast for U.S. growth to 2.3% this year, down 0.2%age point since the IMF's last global outlook in January. The downgrade reflects the impact of the partial government shutdown that ended in January, as well as lower-than-expected public spending. The IMF slashed its outlook for the euro area to 1.3% this year, down 0.3 point from three months ago. The IMF cut its outlook for U.K. growth to 1.2% this year, down 0.3 point from three months ago. The IMF raised its forecast for Chinese growth by 0.1 point to 6.3% this year, while lowering its projection for growth in Japan by 0.1 point to 1%. The fund cut its outlook for India's growth this year to 7.3%, down from 7.5% in January.

U.S. data overnight added to the cautious mood, with job openings dropping to an 11-month low in February and raising doubts about the strength of U.S. labor market, which has so far been one of the few bright spots in the economy.

Global trade anxiety was another sore point for risk asset markets. U.S. President Donald Trump threatened to impose tariffs on $11 billion worth of European Union products, heightening tensions over a long-running transatlantic aircraft subsidy dispute. The move came as markets remain on edge as negotiators try to hammer out trade deals with China and neighbours Mexico and Canada.

Blue chips were mixed. HSBC (00005) inched down 0.1% to HK$66.95. HKEX (00388) fell 0.5% to HK$281 even though it signed an MOU with Hebei Government to seek more companies to list in HK from the province. Tencent (00700) gained 1.4% to HK$388.8 after HSBC Research lifted its target price to HK$438. China Mobile (00941) edged up 0.1% to HK$78.2. AIA (01299) nudged up 0.7% to HK$80.25.

Shares of consumer staples saw selling pressure. China Mengniu Dairy (02319) retreated 2.3% to HK$29.5 after a 3% rally yesterday. Want Want China (00151) dipped 1.4% to HK$6.55. Uni-President China (00220) slipped 2.7% to HK$7.2. Tingyi (Cayman Islands) (00322) fell 1.6% to HK$12.64.

Shares of pharmaceutical counters declined after the National Health Commission said it aims to set up a monitoring system on drug use. Sino Biopharmaceutical (01177) slipped 1.1% to HK$8.16. CSPC Pharmaceutical (01093) fell 1% to HK$16.16. Sinopharm Group (01099) softened 0.9% to HK$32.7. Fosun Pharmaceutical (02196) jumped 2.7% to HK$30.35 after its Chairman Chen Qiyu said the group is considering to push some of its units to list on the "Science and technology innovation" board.

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