Hong Kong Stocks fall as China data sours

Headline shares of the Hong Kong financial market closed lower on Monday, 14 January 2019, with investor elected to lock in profits in line with broader Asian peers, after Chinese government data showed that December exports and imports fell unexpectedly, deepening concerns of a slowdown in the world's second-largest economy as Beijing's trade war with the U.S. appeared to be taking a toll. At closing bell, the Hang Seng Index tumbled 368.94 points or 1.38% to 26,298.33. The Hang Seng China Enterprises Index slumped 162.51 points or 1.55% to 10,292.44. Turnover decreased to HK$73.4 billion from HK$88.7 billion on Friday.

China's exports to the world fell 4.4% in December from a year earlier, the biggest monthly drop in two years, pointing to further weakening in the world's second-largest economy. Imports also unexpectedly contracted, falling 7.6%, the biggest decline since July 2016. China's global trade volume rose last year but its surplus with the world fell 16.2% to $351.76 billion in 2018, as imports rose 15.8% while exports gained 9.9%. Much of the optimism built up last week following a round of mid-level trade talks appears to have evaporated.

At the same time, China's overall trade surplus with the U.S. hit a record in 2018, underscoring the political imperative to cut a deal ahead of a March 1 deadline after which U.S. President Donald Trump has threatened to impose additional tariffs on Chinese goods. The customs data showed that China's exports to the U.S. contracted in December 2018 although its overall trade surplus with the U.S. hit a record $323 billion in 2018. Exports to the U.S. rose 11.3% to $478.4 billion for the year despite punitive tariffs imposed by President Donald Trump in a fight over Chinese technology ambitions. The customs data showed imports of American goods rose just 0.7% in 2018 over 2017, reflecting the impact of Beijing's retaliatory tariffs and encouragement to importers to buy more from non-U.S. suppliers.

Chinese Vice Premier Liu He is slated to travel to the U.S. for further talks around the end of this month, with little progress seen so far on the tougher areas of the dispute such as China's treatment of intellectual property or support for state firms. The headwinds from trade comes at a time when policy makers are already grappling with decelerating consumption, falling factory sentiment, fears of producer deflation and a worsening employment outlook.

On top of trade data, investors weighed the latest arrest involving Huawei. The China telecommunications giant's chief financial officer had earlier made international headlines when entangled in a sanctions fraud case in Canada. Then last Friday, it emerged that sales director Wang Weijing was arrested in Poland on suspicion of espionage. Huawei swiftly moved to fire and distance itself from Wang. The latest arrest amplified concerns over increasing obstacles Huawei will face in conducting business in Europe, where many people associate the company's technology with China spying activities.

Shares of exporters and consumer discretionary companies declined on the back of China worse-than-expected trade data. Shenzhou International Group, China's largest knitwear manufacturer and exporter, fell 2.3 per cent to HK$89.75.

Carmakers took a beating too on weak trade data, with leading electric vehicle maker BYD plummeting 4.8 per cent to HK$45.2. Geely Automobile Holdings declined 2.9 per cent to HK$10.78, after its parent company denied media reports that it had cut its 9.7 per cent stake in Germany's Daimler AG.

Shares of oil majors were lower on further weakening of oil prices in Asian hours. CNOOC (00883) pounded 4.7% to HK$12.22. It was the biggest blue-chip loser. PetroChina (00857) slipped 3.2% to HK$4.9. Sinopec (00386) dipped 1.6% to HK$6.04.

Macau gaming counters were lower in tandem with the overall market sentiment. Galaxy Entertainment (00027) shed 3.6% to HK$46.3. Sands China (01928) sank 2.8% to HK$34.65. Wynn Macau (01128) retreated 4.3% to HK$16.24. SJM Holdings (00880) fell 2.9% to HK$6.77. MGM China (02282) dropped 2.4% to HK$12.9. Melco International Development (00200) fainted 2.8% to HK$15.28.

Handset components markers were also softer. Sunny Optical (02382) dipped 1.6% to HK$67.65. AAC Technologies (02018) retreated 1.2% to HK$45.65. ZTE Corp (00763) slid 3.3% to HK$15.46. Q Technology (01478) sank 5% to HK$4.42. BYD Electronic (00285) plunged 5.6% to HK$8.95. Xiaomi Corporation (01810) fell 3.1% to HK$10.02 after the company issued 1.26 billion B shares.

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