RTTNews - The Hong Kong stock market headed right back into negative territory on Tuesday, one day after snapping the three-day losing streak in which it lost more than 480 points or 2.8 percent. The Hang Seng Index slid back below the 17,100-point plateau one day regaining it, but now analysts are predicting that the market will rebound on Wednesday, ahead of Thursday's holiday for Dragon Boat Festival.
The global forecast for the Asian markets is cautiously optimistic, although the positive sentiment could be damaged by the test-firing of another missile on Wednesday morning by North Korea. The markets get a boost from better than expected economic data out of the United States, and retailers also are forecast to trade higher. The European markets finished mostly higher and the U.S. markets ended sharply higher - and the Asian bourses are also tipped to trade in the green.
The Hang Seng finished modestly lower on Tuesday, dragged to the downside by mainland China shares. Oil producers also traded lower, as did the financials and commodities - although gains among the properties offset some of the losses.
For the day, the index shed 130.26 points or 0.8 percent to close at 16,991.56 after trading between 16,977.71 and 17,283.89 on turnover of 56.29 billion Hong Kong dollars.
Among the actives, CNOOC slid 3.3 percent, while PetroChina dropped 1.1 percent, Sino Land soared 8.7 percent, Cheung Kong jumped 2.5 percent, Henderson Land rose 2.0 percent, Chalco fell 3.6 percent and Citic Pacific jumped 5 percent.
The lead from Wall Street is broadly positive as stocks staged a substantial rally over the course of the trading day on Tuesday after seeing some initial weakness, snapping a four-day losing streak. The major averages finished near their best levels of the day, bolstered by some positive news on the health of the U.S. consumer.
The Conference Board's reading on consumer confidence for May improved by far more than expected, reaching its highest level since September. The data generated some optimism about the outlook for consumer spending, which accounts for nearly two-thirds of economic activity. The consumer confidence figure helped to bolster some of the day's risk appetite, as reflected by the surge in equities following the release of the report.
Earlier in the day, disappointing housing price data contributed to the initial weakness. Traders largely shrugged off the data, however, citing the lagging nature of the numbers and choosing to focus on the encouraging consumer confidence data.
Retail stocks enjoyed a considerable run-up on the day, benefiting from the better than expected consumer confidence data. The S&P Retail Index closed up 4 percent, although it remains well off the seven-month highs that it set earlier this month.
The major averages moved roughly sideways in the second half of the day, holding onto strong gains. The Dow closed up 196.17 points or 2.4 percent at 8,473.49, the NASDAQ rose 58.42 points or 3.5 percent to 1,750.43 and the S&P 500 closed up 23.33 points or 2.6 percent at 910.33.
In economic news, Hong Kong on Tuesday announced additional HK$16.8 billion stimulus package to shore up the economy, which sunk deeper into recession in the first quarter of the year. The global financial crisis has hit Hong Kong severely as demand shrank considerably internationally. In the first quarter, the economy contracted the most since records began in 1990. In the latest package, the government raised a waiver on salary tax payments to HK$8,000 for 2008-09 from HK$6,000. The government will pay the basic rent for 700,000 public housing estates tenants for two months, while recipients of social welfare and disability allowances will receive an additional one-month payment.
Also, the Hong Kong Census and Statistics Department said on Tuesday that the trade deficit stood at HK$ 16.4 billion in April, narrowing from HK$ 18.2 billion deficit in March. Economists had expected a deficit of HK$ 11.8 billion. Exports value declined 18.2 percent year-on-year to HK$ 199 billion in April, after falling 21.1 percent in March. Economists were looking for a decline of 24 percent. At the same time, re-exports declined 17.5 percent to HK$ 194.4 billion, while domestic exports dropped 40.2 percent to HK$4.6 billion.
Meanwhile, the value of imports decreased 17 percent annually to HK$ 215.4 billion in April compared to a 22.7 percent drop in the preceding month. Economists had expected a decline of 24.6 percent for April. For the January to April period, the value of exports and imports declined by 20.9 percent and 21.2 percent, respectively. During the period, the trade deficit amounted to HK$ 50.6 billion.
Finally, the Hong Kong Monetary Authority said on Tuesday that the value of new residential mortgage loans drawn down increased 19.3 percent month-on-month in April, compared with the 25.5 percent growth in the previous month. At the same time, the value of new loans approved increased 31.4 percent in April, compared to the 46 percent increase in the previous month. The value of loans approved increased to HK$ 21.9 billion from HK$ 16.7 billion in the previous month. Meanwhile, the value of outstanding loans increased 0.4 percent to HK$588 billion in April, after falling 0.1 percent in March.
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