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China stock market

Hong Kong stocks rebound as Tencent fears ease; Shanghai rallies to multi-month high

Hang Seng Index rises 0.5 per cent, or 132.96 points, to close at 25,521.97, while the Shanghai Composite Index finished up 0.8 per cent, or 24.33 points, at 3,207.13, its highest closing level in two and a half months.

PUBLISHED : Wednesday, 05 July, 2017, 9:19am
UPDATED : Wednesday, 05 July, 2017, 10:37pm

Hong Kong stocks staged a modest rebound on Wednesday, as Chinese tech giant Tencent reclaimed ground lost in the previous session, although gains were limited as analysts say it remains unclear whether regulations may tighten up for the country’s fast-growing online game industry.

The Hang Seng Index rose 0.5 per cent, or 132.96 points, to end at 25,521.97. On Tuesday the index plunged 1.5 per cent, the steepest percentage drop in more than seven months.

The Hang Seng China Enterprises Index, which tracks the performance of Hong Kong-listed Chinese companies, closed up 0.7 per cent, or 74.75 points, at 10,380.73.

Turnover decreased 15 per cent to HK$84 billion from Tuesday’s HK$99 billion.

Index heavyweight Tencent rebounded 0.7 per cent to close at HK$271, bouncing back from a 4 per cent slide on Tuesday.

Analysts attributed Tuesday’s sell-off partly to the harsh criticism by the People’s Daily, as the Communist Party’s mouthpiece published two editorials on Tuesday that slammed Tencent’s popular online game Honour of Kings for being “addictive”. The newspaper also described the game as “poison” and a “harm” to society and called for tighter industry regulation.

“The commentaries, partly in response to recent public concerns, have raised fears of regulatory actions,” said UBS analysts in a report on Wednesday.

But market concerns seem “overdone” and the pullback might create a buying opportunity, they added.

Last week, Tencent announced new rules that limit the amount of time users below 12 can play Honour of Kings each day.

“Tencent’s measures to limit children’s play time may have limited impact on the company’s online game revenue, as the core users are not in this age category,” said Ricky Lai, an analyst for Guotai Junan Securities.

Citic Securities was also positive on Tencent, forecasting its gaming business to continue to grow at a steady pace. The broker put a target price of HK$$334 on Tencent’s shares.

However, Lai from Guotai Juan warned investors of potential policy risks.

“The regulators may lay out new rules to regulate the mobile game industry. This may affect the profit model of games.”

Other gainers included mainland Chinese insurers, which also bounced back following losses in the previous session. Ping An Insurance jumped 3.7 per cent to HK$53.8, and New China Life Insurance surged 5.6 per cent to HK$41.5.

The State Council, China’s cabinet, said on Tuesday that the government will speed up the development of commercial pension insurance. According to the guidelines issued on Wednesday, commercial pension funds are also encouraged to invest in domestic stocks and bonds.

China Unicom ranked as the worst-performing blue-chip,. dropping 4.1 per cent to HK$10.8. Morgan Stanley said its expected the company’s second-quarter earnings to disappoint and rated its stock underweight, with a target price of HK$10.

On the mainland, the Shanghai Composite Index finished up 0.8 per cent, or 24.33 points, at 3,207.13, the highest level in two and a half months.

The large-cap CSI300 advanced 1.1 per cent to 3,659.68. The Shenzhen Composite Index and the ChiNext index rose 0.9 per cent and 0.4 per cent respectively to 1,913.14 and 1,836.63.

Combined turnover for Shanghai and Shenzhen increased to 410 billion yuan from Tuesday’s 384 billion yuan.

Shanghai-listed Ping An Insurance rallied 5.2 per cent to 50.42 yuan, and New China Life Insurance soared 7.3 per cent to 53.69 yuan.

With additional reporting by Zhang Shidong

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