Daily Report

Hong Kong, Shanghai notch gains in cautious trade; Tencent rises, Li Ka-shing companies ease back on Husky investment

PUBLISHED : Tuesday, 26 April, 2016, 6:37pm
UPDATED : Wednesday, 27 April, 2016, 10:38am

Hong Kong and mainland markets erased earlier losses in afternoon trading to close higher on Tuesday, with investors reluctant to load up on risk assets ahead of important meetings this week from the US Federal Reserve and Bank of Japan.

The benchmark Hang Seng Index added 0.48 per cent or 102.83 points to 21,407.27 , and the Hang Seng China Enterprise Index, tracking mainland-based companies, increased 0.33 per cent or 29.79 points to 9,016.12.

Hannah Li Wai-han, a strategist at UOB Kay Hian, said Hong Kong stocks are in a wait-and-see mood as investors are cautious ahead of US Fed Reserve’s meeting on Thursday.

“I expect no big surprise on the meeting and the Fed is less likely to change its dovish tone.” said Li. “As such, Hong Kong stocks will experience low volatility.”

The top five active shares in Hong Kong all increased but the gains were modest. Tencent, China’s second biggest internet company, rose 1.19 per cent to HK$161.8, reversing five consecutive losing sessions.

Alex Fan, managing director of GF Securities in Hong Kong, said the Hong Kong market was directionless as investors were closely watching meetings of the Bank of Japan and the US Federal Open Market Committee this week for hints on their monetary policies.

The Bank of Japan is about to unveil a new tactic in the currency war

Ali Health narrowed its decline to 6.24 per cent, closing at HK$5.26 in Hong Kong, after the company disclosed that Hong Kong authorities had ruled that parent company Alibaba Group had breached certain rules in the conditions of their original merger in 2014. Alibaba Group is the owner of the South China Morning Post.

Cheung Kong Infrastructure dropped 1.13 per cent to HK$74.10, after it announced it was jointly injecting HK$7 billion with Power Assets, another company owned by Hong Kong billionaire Li Ka-shing, to buy a 65 per cent stake in the midstream assets of Canada-based oil producer Husky, another company owned by Li. Power Assets Holdings fell 1.4 per cent.

Li Ka-shing’s Power Assets and CKI to invest in his troubled Canada-based oil firm Husky

“The overall sentiment is optimistic now, as most people anticipate the US Fed will hold off on a rate hike until at least September,” Fan said. “However, the Hong Kong market could trade downward if the Fed changes its tone from dovish to neutral.”

Both the Hong Kong and mainland markets had been weighed by a recent wave of bond defaults, which didn’t bode for the outlook, given that the recent improvements in economic data were likely to be only temporary, he added.

The Beijing Auto show, which kicked off Monday, helped to put the shine on some vehicle makers.

BYD, a major Chinese new-energy vehicle manufacturer, saw its shares up 2.4 per cent to close at HK$44.5. Geely Auto, the Chinese car maker that owns Volvo and London Taxis International, jumped 2.25 per cent to HK$4.09.

Mainland Chinese stocks also ended higher on Tuesday, shrugging off their earlier losses, with gains seen across all main sectors.

The mainland’s benchmark Shanghai Composite Index added 0.61 per cent, to 2,964.70, while the CSI 300 – which tracks large companies listed in Shanghai and Shenzhen – increased 0.54 per cent to 3,179.16. The Shenzhen Composite Index increased 1.19 per cent, or 22.09 points to 1,881.99. The Nasdaq-style ChiNext Index gained 1.36 per cent, or 28.86 point to 2,155.70.

UOB Kay Hian strategist Li warned that tighter monetary policy on the Chinese mainland could be on the way, as authorities focus on the massive surge of interest in commodity trading on the mainland.

“Rising transaction fees ar not enough to stop the speculators,” she added. “The stock market will unavoidably be hurt if the Chinese central bank tightens liquidity in order to cool down commodity market.”