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Wednesday, July 22, 2015, 09:02

Bailout retreat hits sideline investors

By Emma Dai
Bailout retreat hits sideline investors

Turnover on the main board in the Hong Kong stock market fell to HK$80.84 billion on Tuesday — the lowest since the end of March. The timing of mainland authorities to withdraw their bailout funds now tops concerns of investors on the mainland and in Hong Kong. ( ASIA NEWS PHOTO)

Experts forecast further correction in mainland stock market in H2

Hong Kong’s stock market has been softened on the shortage of catalyst. Uncertainties over the retreat of mainland authority bailout fund and the upcoming result season cool local investment atmosphere.

Experts believe investors are just adopting a wait-and-see attitude following the market’s rebound from the rout on both the mainland and Hong Kong bourses in July.

The Hang Seng Index edged up by a mere 0.52 percent, or 131.62 points, to close at 25,536.43 points on Tuesday, while the Hang Seng China Enterprises Index rose 0.83 percent to 11,871.54 point, and the Hang Seng China-Affiliated Corporations Index climbed 62.86 points, or 1.37 percent, to 4,657.38 points.

Share prices in Shanghai and Shenzhen were also flat on Tuesday. The Shanghai Composite Index — the gauge that reflects mainly State-owned enterprises and big caps — rose by 0.64 percent to 4,017.67 points. The Shenzhen Composite Index — the barometer of small-and-medium caps — moved up by 1.56 percent to 2,265 points.

“Both markets still lack catalysts to move forward at this stage. The bullish sentiment is not strong. Some of our clients intend to buy, but are cautious. They are very selective now and are only interested in value names and seeking companies with improved fundamentals,” said Alexander Lee, research director at DBS Vickers Securities.

The turnover on the main board in the Hong Kong stock market fell to HK$80.84 billion on Tuesday — the lowest since the end of March. “The latest concern is when the mainland authorities will withdraw their A-share bailout funds,” Lee said. “We don’t expect it to happen any time soon. But there is due to be a market overhang once the government funding retreats. Eventually, it will exit and regular market practices, such as new flotation, will resume.”

“Mainland economy data released last week was better than expected. Concerns lingering around mainland banks are also gradually easing. But, there’s not much to celebrate other than that,” said Will Leung Chun-fai, head of investment strategy at Standard Chartered Bank (HK) Ltd.

Mainland’s GDP grew by 7 percent on year in the second quarter, the National Bureau of Statistics said last Wednesday, beating a previous market consensus of 6.8 percent.

Leung added that investors are waiting for the quarterly corporate earnings results, which are due next month.

He predicted that the A-share gauge is likely to reach 4,500 in the third quarter, which “looks like” the official target of the mainland authorities. But he warned that market volatility will increase as the Shanghai Composite Index approaches that level. “Selling pressure could then mount.”

Despite the lackluster market, Lee said some sectors could still outperform. “That includes mainland property companies. Property prices and the sales volume had gone up in June. It’ll be a positive sign if the trend continues. We also overweight the Internet and e-commerce sectors because they will obviously grow faster than the overall retail sector in the next two to three years at least.”

“The global economy is fragile. Even the recovery in the US is weak. As a result, companies whose businesses are highly related to the macro-economic cycle may suffer from poor earnings results. The technology sector, on the contrary, is relatively immune.”

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