Stock rally capped near 14,000 by profit taking
Hong Kong stocks finished slightly higher yesterday, supported by strong buying of index heavyweights HSBC and PetroChina, but once again the Hang Seng Index was capped at the 14,000-point level.
According to brokers, investors were already focusing on Bank of Communications, which will start accepting retail subscriptions for its US$1.4 billion to US$1.9 billion initial public offering on Monday.
They expect the offer to soak up some liquidity from the secondary market, but say if demand turns out to be as good as the anecdotal evidence suggests, the offer could also boost sentiment.
Federal Reserve chairman Alan Greenspan said that the US economy was on firm footing, but added the pace of future interest rate rises would remain 'measured' as inflation was well contained.
His comments eased concerns about a slowdown of economic growth in Asia's largest trading partner, supporting exporters and causing equity investors across the region to breathe a sigh of relief.
Property counters were mostly unchanged even though Mr Greenspan did not firmly quash recent speculation the US interest-rate cycle might be nearing its end.
The Hang Seng Index finished up 0.26 per cent, or 36.45 points, at a four-week high of 13,934.76, after hitting a high of 13,972.71. It gained 0.84 per cent on the week.
'The market [again tried] to break through 14,000, but as it was Friday and the US [was to] release trade figures after the market closed, people chose to take profits rather than push ahead,' said Phillip Securities research director Louis Wong.
He noted that the futures market was showing more strength with the June index futures contract closing at 13,977 points and the July contract at 14,020.
'If interest rates stay low and the mainland markets stabilise, then maybe next week we can break 14,000,' said Fulbright Securities general manager Francis Lun Sheung-nim.
HSBC accounted for almost half of the index gains as it rose 0.4 per cent to $125. Brokers said a large batch of outstanding warrants on the stock with a strike price of $123.88 was contributing to the gains as warrant issuers needed to buy more shares to hedge their positions as the share price rose further above the strike price.
Among exporters, micromotor maker Johnson Electric rose 0.68 per cent to $7.35, and athletic shoe maker Yue Yuen gained 0.23 per cent to $22.25. Both firms will report earnings on Monday.
Ports operators also remained strong with China Merchants rising 1.72 per cent to $14.75 and Cosco Pacific up 1.35 per cent to $15.05.
Buying focus was on China-linked shares, however, after PetroChina confirmed it would pay 20.74 billion yuan for 50 per cent of a joint venture with its parent that would own some of its overseas oilfield assets. A rebound in crude oil prices above US$54 per barrel further lifted the sector, helping PetroChina jump 2.83 per cent to $5.45. CNOOC rose 1.22 per cent at $4.15.
Linfair, which started trading yesterday after raising $66 million in an initial public offering priced at the bottom of the range, gained 3.41 per cent to 91 cents.
