Hong Kong Stocks Slide on Sino-American Tensions and Record-Setting Rise in U.S. Covid-19 Cases

Despite the benchmark's performance, HSI is still on pace to end with a monthly gain,

Author: Anthony Russo   

Hong Kong stocks finished the week in red as investors have been concerned over record high of Covid-19 cases across the U.S. and rising trade tensions.

The most recent move in the trade war came from the U.S. Senate Thursday when it passed legislation aiming to punish Beijing for its violations over Hong Kong's sovereignty. 

One bill, the Hong Kong Autonomy Act authored by Sen. Pat Toomey of Pennsylvania and Democratic Sen. Chris Van Hollen of Maryland, looks to punish businesses and individuals that help China limit Hong Kong's autonomy.

That bill was authored by Republican Pat Toomey of Pennsylvania and Democratic Senator Chris Van Hollen of Maryland.

A second measure introduced by  Republican Senator Josh Hawley condemned China for violating a 1984 agreement which guaranteed autonomy for Hong Kong.

"This could be our last opportunity to stay Beijing's hand before it destroys what is left of freedom in the city," Hawley said.

Meanwhile, China's health authorities reported 13 new Covid-19 cases on Friday in the mainland, that's nothing compared to how what is happening in the U.S. According to Johns Hopkins University, the U.S. reported more than new 40,000 infections on Thursday, marking a new all-time high.

As a result, at Friday's close, the Hang Seng Index inched nearly 1% lower to 24,549.99 points. That's down from last Friday's total of 24,643.89 points. Some of the biggest losers today were telecommunications firms like China Mobile Ltd., (HKEX: 00941), which fell nearly 3% to HK$53.40 per share, and China Unicom (Hong Kong) Ltd., (HKEX: 00762) which dropped approximately 3% to HK$4.32 per share.

One big winner today was the smartphone lens manufacturer Sunny Optical Technology (Group) Company Ltd., (HKEX: 02382) whose stock jumped 5% to HK$126.30 following Citigroup upgrading the stock to a buy and Daiwa Capital Markets reaffirming its buy rating.

Despite the benchmark's performance, HSI is still on pace to end with a monthly gain; it opened the month at 23,539.91 points.

"The [likely] gain in June was because the drops in January and March were so big," Linus Yip, a chief strategist at First Shanghai Securities said.

He added, "But global central banks' easing monetary policies do give people hope. Liquidity is abundant, which is supporting the bond market, and economies are reopening, although the pandemic seems to be rebounding."