HONG KONG: Hong Kong stocks may head lower on the first trading day of the Year of Rooster on Wednesday, as they return from a four-day holiday weekend to catch up with recent losses for global equities amid concerns over Donald Trump’s tightening of US immigration rules, analysts say. Last Friday, the Hang Seng Index closed at 23,360.78, up 21 per cent for the Year of the Monkey, reflecting the biggest annual jump since the Year of the Ox in 2009. Meanwhile, the Hang Seng China Enterprise Index rose 21.73 per cent in the prior lunar calendar year to 9,804.05. Sentiment had received a boost from the US equities, as the Dow Industrial Average topped 20,000 last week for the first time. However, a controversial immigration ban from US President Donald Trump has unnerved global investors since the end of last week, with the Dow Industrial Average plunging by the most in three months, declining 122.65 points to 19,971.13 on Monday.
The CBOE Volatility Index, a measure of investor anxiety, jumped 12 per cent on Monday, the biggest increase in three months. The price of gold rose for the first day in five, with April gold futures settling at US$1,196 an ounce. Traders work as US President Trump is seen on television on the floor of the New York Stock Exchange on Monday, January 30, 2017. Photo: Bloomberg On Tuesday afternoon in Asia, US stock index futures all declined, with the S&P 500 futures down 0.2 per cent, and both the Dow and the Nasdaq futures off 0.2 per cent. “If the surge in CBOW volatility index and the climb back toward the US$1,200 level for gold tells me anything, it’s that Asian markets are poised for declines,” said Pan Jingyi, a strategist for IG Group. “Chinese and Hong Kong markets will be glad to sit out this reactive stage on Tuesday.”
The jump in global volatility bodes ill for Hong Kong when trading resumes Wednesday, and mainland China when traders return on Friday. “Moderation is not promised, with the increasing uncertainty we have seen since Trump’s inauguration,” Pan said. On Friday, Trump signed an executive order banning immigrants and refugees from seven Muslim-majority countries. Acting Attorney General Sally Yates — an Obama administration appointee — was fired on Monday after she refused to enforce the legal order. Dana Boente, who was appointed to replace Yates, has since instructed the Justice Department’s lawyers to defend the immigration ban against legal challenges. The US dollar weakened against major currencies for the second day on Tuesday, weighing on the stock prices of Asian exporters and technology firms. The greenback weakened by as much as 0.5 per cent to 113.24 against the yen, dropping by a combined 1.4 per cent since Friday. The US currency also weakened 0.05 per cent against the euro, dropping to 1.07, while falling 0.2 per cent to 1.2515 per pound. In the offshore yuan market, the dollar bought 6.8562 yuan, down 0.1 per cent from Monday’s 6.8633 yuan. Onshore yuan trading has been shut since January 27 for Lunar New Year holidays.
“Investor sentiment has quickly turned, as the Tumpenomics’ rally has given way to a vote of no confidence from investors who are growing leery of Trump’s agenda and are restless about the lack of focus on the fiscal front,” said Stephen Innes, a senior currency trader at Oanda Asia Pacific. Currency market gyrations spilled over to Asian equities during the holiday-shortened trading week, with bourses closed in Hong Kong, Shanghai, Shenzhen and Taiwan on Tuesday. Stock indexes fell across Asia, with the Nikkei 225 Index dropping 1.7 per cent in Tokyo to close at 19,041.34. The Kospi Index in Seoul fell 0.8 per cent to end at 2,067.57. Technology stocks led declines in Tokyo, with NEC Corp sinking 17.4 per cent to finish at 261 yen, while Canon dropped 1.4 per cent to 3,345 yen. “There’s an increasing level of unease amongst investors that the recent executive orders are eroding political relationships abroad and will have negative impact on US trade negotiation,” Innes said.
