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Hong Kong market posts biggest weekly gain in nearly two months as China financials rebound

China Life Insurance saw its shares jump 13.7 per cent this week, the biggest weekly gain since April 2015 as rising domestic bond yields boost insurers’ investment returns

PUBLISHED : Friday, 25 November, 2016, 9:03am
UPDATED : Friday, 25 November, 2016, 9:48pm

Hong Kong stocks notched up their biggest weekly gain in nearly two months, supported by a rally in the Chinese financial sector driven by a rebound in insurance stocks.

The Hang Seng Index closed Friday trading at 22,723.45, up 0.51 per cent. It surged 1.7 per cent this week, the biggest gain since October 7. The Hang Seng China Enterprises Index continued to outperform the blue-chip benchmark, ending 1.15 per cent or 111.46 points higher at 9,790.23.

Trading turnover was low at HK$56.2 billion after the US market was closed for trading on Thursday due to Thanksgiving Day, and will close three hours earlier during Friday trading.

Insurance companies led the Hong Kong rally. PICC Property and Casualty Company was the best performer on the H-share index, ending 4.78 per cent higher at HK$13.16. China Life Insurance Company gained 3.89 per cent to HK$22.7. China’s largest life insurer saw shares its jump 13.7 per cent this week, the biggest weekly rise since April last year.

The banking sector also led the way, with China Merchants Bank adding 1.27 per cent to HK$19.18, while shares Industrial and Commercial Bank of China increased 1.3 per cent to HK$4.67.

But gaming stocks retreated, with Macau casino operator Sands China’s shares falling 1.68 per cent to HK$38.0, the worst-performing blue chip for the session. Galaxy Entertainment shares lost 1.07 per cent to HK$37.0.

Linus Yip Sheung-chi, First Shanghai Securities chief strategist, said the Hong Kong market has been supported by the rally in Chinese financials, such as banking, insurance and securities, as expectations for a US interest rate rise in December have pushed up bond yields in global markets, including the mainland.

“An increase of interest spreads in China is benefiting domestic banks and insurers. The rally came a bit late compared with foreign banks such as HSBC Holdings,” Yip said.

HSBC shares inched up 0.24 per cent to HK$61.6, having risen 6 per cent since Donald Trump was elected next US president, partly due to the bank’s share repurchase scheme.

Yip said the short-term rebound hasn’t reached an end but the Hang Seng Index will face more resistance at 23,000 to 23,600.

Brett McGonegal, chairman and chief executive of Capital Link Investment Holdings, said global stocks were still buoyed by the buying spree driven by expectations of what president-elect Donald Trump would do in office.

“I’m calling it kind of a honeymoon,” he said. “Global markets are applauding the fact that this new government will come in and will be highly predicated on, and focussed on, creating jobs.”

He believes the markets have now hit the upper range of the post-election rally, and expects a correction and some volatility before Trump is sworn in early next year.

“If you ask anyone why they’re buying stocks right now, they don’t really know. It’s a big momentum trade.”

Yip said that the Hong Kong market was also buoyed by a rebound in the A-share market.

The Shanghai Composite Index ended at a 10-month high on Friday, up 0.62 per cent or 20.2 points to 3,261.94, supported by the property, steel and banking sectors. For the week, the Shanghai benchmark increased 2.16 per cent.

The CSI 300 index, which tracks large caps in Shanghai and Shenzhen, rose 0.93 per cent to 3,521.3. The Shenzhen Component Index rose 0.63 per cent to 11,036.53, breaking above the 11,000 threshold for the first time since January 7, while the Nasdaq-style ChiNext rebounded 0.97 per cent to 2,167.53.

Additional reporting by Julia Hollingsworth

jennifer.li@scmp.com

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