Financial stocks lead China markets higher after IPO resumption news, HK stocks weighed by interest rate concerns
Mainland Chinese markets kicked off the week on an upbeat note, rising to an 11-week high on Monday, led by financial companies, but a volatile Hong Kong market was unable to sustain momentum, falling back late in the session to end the day in negative territory.
The Shanghai Stock Exchange closed up 1.6 per cent to finish at 3646.8, its highest close since August 20th, while the Shanghai Shenzhen CSI300 tacked on 1.2 per cent to 3840.35.
In Shenzhen, the local exchange closed at 2191.60, up 1.82 per cent on the Friday close.
Stocks were lifted as investors celebrated the announcement by Chinese market regulators on Friday that they will resume initial public offerings after a four month suspension following the summer market unease.
The jump came in spite of new Chinese trade data released over the weekend which showed October experts had fallen 6.9 per cent from a year earlier, down for the fourth month in a row. The news sent the onshore yuan falling to a three week low of 6.3622 against the US dollar.
Philip Securities director Louis Wong said investors’ positive response to the IPO announcement was the major factor helping to send stocks higher.
“They feel it reflects that the Chinese government regards the market as having stabilised,” he said.
Fears that capital will be diverted into equities saw yields on Chinese sovereign notes due 2025 climb 11.5 basis points to 3.25 per cent yesterday, the biggest jump this year, confirming the end to a recent bond market rally as investors shifted out of equities during the summer rout.
The rise in the Shanghai exchange was primarily driven by financial stocks, including Industrial and Commercial Bank of China, which rose 3.2 per cent to 4.80 yuan, and the Agricultural Bank of China, which added 3.75 per cent at 3.32 yuan.
Wong said the surge in Chinese financial stocks was to be expected. “The resumption of initial public offerings will benefit the securities brokers who function as underwriters and sponsors for the new listings,” he said.
However Hong Kong’s Hang Seng Index was unable to keep pace, closing down despite early rises in the market.
The market eased 0.61 per cent to close at 22726.77, as investors weighed up the increased probability of a US interest rate hike in December following a positive monthly jobs released Friday. French bank SocGen put the probability of rate hike at the upcoming December meeting at 70 per cent, revising its estimate of 50 per cent chance prior to the monthly jobs data.
Chinese investment bank China International Capital Corp rose 7.4% in debut trade to end at HK$11.02
“As the Hong Kong dollars is linked to the US dollar a hike in the interest rate will not benefit the local economy,” Wong said.
The Hang Seng China Enterprises also dropped to 10497.60 down 0.55 per cent.
With additional reporting by Agencies