HK's Hang Seng index drops to fresh low after worrying signs of trade war

Hong Kong stocks ended at a four-month low on Friday, capping their worst month since October 2018, as a collapse in trade talks between Beijing and Washington dented investor confidence and triggered economic slowdown fears. ** The Hang Seng index ended down 0.8% at 26,901.09 points, piercing through the 27,000-point level seen by some as providing technical support. The China Enterprises Index lost 0.6% to 10,387.17 points. ** For the month, Hang Seng tumbled 9.4% and HSCE slumped 10%.

Trade tensions between Beijing and Washington rapidly worsened this month, after U.S. President Donald Trump accused China of reneging on earlier promises in trade talks, and slapped fresh tariffs on $200 billion of Chinese goods, triggering retaliation from China. ** China President Xi Jinping and his U.S. counterpart are likely to find it "difficult" to make major progress towards ending their countries' trade war when they meet at a G20 summit in Japan in June, Dai Xianglong, a former Chinese central bank chief said on Friday.

The collapse in trade talks strengthened concerns of a slowdown in China's economy. An official survey released on Friday showed that China's factory activity in May slumped into a deeper contraction than markets had expected. ** The sub-index of the Hang Seng tracking energy shares dropped 2.7%, while the IT sector rose 0.32%, the financial sector ended 0.69% lower and the property sector closed 2.02% weaker.

The top gainer on the Hang Seng was Sands China Ltd, which gained 1.87%, while the biggest loser was Wharf Real Estate Investment Company Ltd, which dropped 4.55%. Around the region, MSCI's Asia ex-Japan stock index was firmer by 0.21%, while Japan's Nikkei index closed down 1.63%. ** The yuan was quoted at 6.902 per U.S. dollar at 0829 GMT, 0.01% weaker than the previous close of 6.9013.

The top gainers among H-shares were Huaneng Power International Inc up 2.7%, followed by China Railway Group Ltd, gaining 2.09% and China Gas Holdings Ltd, up by 2.02%. The three biggest H-shares percentage decliners were China Mobile Ltd, which ended down 2.28%, China Huarong Asset Management Co Ltd, which closed 2.2% weaker and CNOOC Ltd, down by 2.1%.