RTTNews - The Hong Kong stock market has finished lower now in back-to-back sessions and in five of the last six trading days. Now analysts say that trend of decline is likely to continue on Wednesday as the Hang Seng Index is predicted to spiral further below the 18,000-point plateau.
The global forecast for the Asian markets is laced with pessimism as investors are likely to be cautious ahead of the opening of corporate reporting season for the second quarter. A steady decline in commodities for the fifth straight day also is expected to weigh on investors. The European and U.S. markets finished sharply lower, and the Asian bourses are tipped to follow that lead.
The Hang Seng finished modestly lower on Tuesday, thanks to selling pressure among the financial stocks and the insurance companies. For the day, the index shed 117.14 points or 0.65 percent to close at 17,862.27 after trading between 17,821.71 and 18,159.99 on turnover of 50.66 billion Hong Kong dollars.
Leading the decliners, China Construction Bank fell 1.2 percent, while Ping An Insurance lost 3.3 percent, PetroChina shed 2.0 percent and CNOOC dropped 1.5 percent.
The lead from Wall Street is broadly negative as stock finished sharply lower on Tuesday, with traders doing some profit taking on the day amid a lack of significant economic data to drive trading. The major averages all closed lower by considerable margins, with the sell off accelerating late in the session. Cashing in on recent gains, traders braced for what is expected to be a dreary earnings reporting season, with aluminum producer Alcoa (AA) set to report after the close of trading on Wednesday.
Aside from the earnings data on tap for the second half of the week, traders are also looking ahead to a series of economic reports on employment, international trade and consumer sentiment, with expectations deflated following disheartening employment data last week.
Earlier today, the results of the Treasury's auction of $35 billion worth of three-year notes cooled investor anxiety in regards to rising interest rates amid the recessionary economic conditions. The sale drew a high-yield of 1.519 percent and attracted moderately strong demand, with the bid-to-cover ratio coming in at 2.62. The bid-to-cover ratio is a measure of demand that indicates the amount of bids for each dollar worth of securities being sold.
Monday, an auction of 10-year Treasury Inflation Protect Securities, or TIPS, drew a yield of 1.92 percent and a bid-to-cover ratio of 2.51, its highest in nine years. Traders will also look the Treasury's sale of $19 billion worth standard ten-year notes on Wednesday. The results of the standard ten-year auction and the sale of TIPS will be closely watched by investors, who will compare the yields to gauge the prospect of near-term inflation.
The government has continued to sell bonds in record amounts to fund its accelerated stimulus spending, while recent comments from the Obama administration have led to rampant speculation regarding a second stimulus package.
The major averages all finished lower, seeing further downside in late day trading. The Dow fell 161.27 points or 1.9 percent to 8,163.60, the NASDAQ closed down 41.23 points or 2.3 percent at 1,746.17, while the S&P 500 dropped by 17.69 or 2 percent at 881.03.
In economic news, the Hong Kong Monetary Authority said on Tuesday that the official foreign currency reserve assets stood at HK$ 207 billion in June, up from US$ 205.1 billion in May. The foreign currency reserves including unsettled forward contracts amounted to US$ 208.2 billion in June, larger than the US$ 205.1 billion in the previous month. The total Forex reserves represent over eight times the currency in circulation or about 47 percent of Hong Kong dollar M3, the agency said.
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