Hong Kong market pulled to two-months high with sentiments recovery
Analysts cite improving sentiment as the risks of a hand landing in the mainland Chinese economy or a sharp depreciation of the yuan appear less likely
Hong Kong and mainland Chinese shares ended higher on Thursday, lifted by signs of a turnaround in the fortunes of Macau casinos, and hopes that Beijing will unveil additional stimulus to pump up the economy.
The Hang Seng Index climbed 2 per cent, or 448.26 points to 22,888.17, while the mainland-China tracking H-share index tacked on 2.1 per cent, or 218.51 points, to 10,552.93.
The Shanghai Composite Index climbed 2.3 per cent to 3,338.07, its highest closing level since August 21. The large -company tracking CSI 300 rose 2.4 per cent to 3,486.82. The Shenzhen Composite Index climbed 3 per cent to 1,941.28, and the ChiNext Index jumped 4.3 per cent to 2,404.53
Erwin Sanft, a China strategist at Macquarie, said market sentiment has improved in recent days as the risk of a hard landing in the Chinese economy or a sharp yuan depreciation both seem unlikely at this stage.
“There are also other positive messages including property recovering and the upcoming Communist Party meeting, which will help to sustain positive sentiment,” Sanft said.
He forecasts the Hang Seng will tack on an additional 15 per cent before the Lunar Nw Year.
Casino operator Galaxy Entertainment’s shares jumped 11.28 per cent to HK$29.10. The company reported at midday that profit before interest, taxes and depreciation amounted to HK$2.1 billion in the third-quarter, a rise of 13 per cent from the prior three-month period. Revenue for the quarter was up 5 per cent to HK$12.3 billion, helped by the opening of a new casino in May.
Sands China shares, also rallied, advancing 10.25 per cent to close at HK$30.65.
Jefferies analysts said last week that sentiment towards the gambling sector should turn positive, as the mainland authorities roll out favourable policies in support of Macau’s economy.
Sands China, Galaxy Entertainment, and three of their smaller Hong Kong-listed peers have attracted at least eight analyst rating upgrades this month, on the basis of a recovery in mass market gambling receipts, and better-than-estimated revenue during the Golden Week holiday, according to a Bloomberg report.
Meanwhile, Chinese telecoms were in focus, after the three largest state-owned carriers agreed to pool their telecom tower assets into the newly-established China Tower, in a deal worth more than 231 billion yuan.
Index heavyweight China Mobile, the country’s largest mobile carrier, rose 2.8 per cent to HK$93.75. Smaller rivals China Telecom and China Unicom gave up gains earlier in the session to close 0.73 per cent and 2.77 per cent lower, respectively.
The People’s Bank of China announced Thursday that it conducted 50 billion yuan of seven-day reverse bond repurchase agreements. Maturing reverse repurchase agreements will drain a net 70 billion yuan from the banking system this week.
Gerry Alfonso, an analyst for Shanghai-based Shenwan Hongyuan Securities, said the market performed strongly with the expectations of further SOE reforms as well as further stimulus giving stocks support on Thursday.
“There seem to be considerable expectations of further economic stimulus, which could mitigate some of the deflationary pressures,” he said.
Looking ahead, analysts from Hong Kong-based KGI Securities said investors may favour sectors expected to benefit from new policy measures from the upcoming 5th Plenum of the Communist Party leadership, which kicks off later this month.