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  • Global stocks unstable as Dow seesaws
        Date:2018-02-08 

    Dow Jones opened up slightly last night following the decline in Asia, with Hong Kong stocks closing 0.89 percent lower after rebounding more than 800 points in the morning session.

    European stocks jumped at midday and Treasuries rose after Tuesday's slump. Gold climbed and crude gave up gains.

    The Hang Seng Index opened up more than 800 points but closed down 272 points to 30,323, which reflected the high volatility. The Hang Seng China Enterprises Index fell 2 percent to 12,433.

    Real estate companies led the drop. Wharf Holdings fell 4.89 percent, Country Garden dropped 4 percent to a one-month low and China Overseas was down 4.92 percent.

    Shares of mainland banks also fell. China Construction Bank dropped 2.64 percent, Agricultural Bank of China lost 1.57 percent and ICBC was down 1.74 percent.

    Tencent Holdings gained amid the drop, closing 1.17 percent higher after once surging 4 percent in the morning session.

    Ping An Insurance was down 1.47 percent.

    The Shanghai Composite index closed down 1.81 percent at 3,309 points while the blue-chip CSI300 index ended down 2.38 percent.

    Goldman Sachs yesterday said the equity market will remain bullish while other analysts said it should be the end of the bull market.

    It said the slump in Hong Kong market is a healthy phenomenon as it has accumulated enough gains and should enter a correction period.

    Global markets have been roiled in the past week after a two-day rout in US equities spilled over into commodities and other assets, before Wall Street rebounded in Tuesday's session.

    Ahead of the tumble, Goldman threw its weight behind raw materials in a February 1 note, saying it is more bullish on commodities than any time since the end of the supercycle in 2008.

    As economies around the world pick up, factories are humming, eating into stockpiles and driving raw material demand, it said.

    "Historically, when you look at commodities they perform very well during rate-hiking cycles," said Jeffrey Currie, the bank's head of commodities research.

    "Oil's what we call in backwardation, where spot prices sit above forward prices, so you buy at a discount and roll up the curve. In other words, it pays to be long."

    Meanwhile, Pictet Asset Management yesterday said that global synchronized growth is in place and the risk of a recession is low.

    "With stronger GDP and higher wage growth expectations leading to a bond sell-off, equity market unwind was also triggered, exacerbated by volatility spikes and risk-parity trading," it said.

    The equity markets correction has been driven by factors such as futures positions, strong year-to-date capital inflows, corporate earnings that need to meet or exceed lofty expectations, and the Lunar New Year holiday that could disrupt capital flows, according to Pictet Asset Management.

    It added: "We do not see this as the beginning of a larger bear market in equities though, but a correction that is healthy. A more moderately paced market is also good for the longer term.

    "It is important to stay flexible and focus on portfolio construction as volatility will rise going forward. As long as global synchronized growth is sustained, Hong Kong and China markets should continue to stay resilient, supported by a number of catalysts."



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