Hong Kong stocks hit one-year high on banking, gaming share rally

Mainland Chinese stocks closed slightly lower as property shares drag

PUBLISHED : Thursday, 01 September, 2016, 9:27am
UPDATED : Thursday, 01 September, 2016, 9:56pm

Hong Kong stocks rose Thursday to their highest close in a year, as a rally in banking and gaming shares and better-than-expected Chinese manufacturing data bolstered investor sentiment.

The Hang Seng Index ended up 0.81 per cent or 185.46 per cent at 23,162.34, the best closing level it has seen since August 19, 2015. The Hang Seng China Enterprises Index, or the H-shares index, gained 0.67 per cent to 9,606.08.

Index heavyweight HSBC Holdings climbed 2.78 per cent to HK$59.1, the highest close since January 5.

“HSBC’s share buyback scheme starting from August has boosted investors sentiment. Meanwhile, increased expectations about an interest-rate rise from the United States this year has also made investors believe that the bank may see wider net interest margin,” said Linus Yip Sheung-chi, chief strategist for First Shanghai Securities.

Shares of HSBC have jumped over 17 per cent since Aug. 2, when the lender kicked off a US$2.5 billion share buyback.

Shares of mainland banks also extended the upward momentum on Thursday, Yip said, as the country’s upcoming debt-to-equity swap scheme is expected to improve the bad-debt level for commercial lenders.

In the meantime, gaming stocks jumped in Hong Kong, after Macau announced a 1.1 per cent year-on-year growth in gaming revenue for August, after 26 consecutive months of falling gaming revenue.

Galaxy Entertainment was the best performer among blue-chips, up 8.12 per cent to HK$27.3. Sands China gained 6.39 per cent to close at HK$32.45.

Investor sentiment also received a boost after China’s factory activity saw an expected pick-up in August, according to an official survey.

The official Purchasing Managers’ Index (PMI), which focuses on large state-owned companies, rose to 50.4 in August, the highest reading since October 2014 and well above July’s 49.9. The tally was also above the 50-point mark that separates growth from contraction.

“The rebound in August official manufacturing PMI reading could reflect the pickup in activity after somewhat disappointing performance in July,” said Zhu Haibin, chief China economist for JP Morgan, in a research report on Thursday.

“Economic policy is likely to stay unchanged in the very near term, but (could) be data-dependent for the rest of the year,” Zhu said.

Nonetheless, the privately-produced Caixin China Manufacturing PMI, which focuses on small and mid-sized firms, dropped to 50.0 in August from July’s 50.6, slightly missing market expectations.

On Thursday, mainland Chinese stocks closed lower, dragged down by property shares.

The rebound in August official manufacturing PMI reading could reflect the pickup in activity after somewhat disappointing performance in July
Zhu Haibin, chief China economist for JP Morgan

The Shanghai Composite Index dropped 0.72 per cent to 3,063.31. The CSI 300 index, which tracks the large caps listed in Shanghai and Shenzhen, was off 0.79 per cent to 3,301.58.

The Shenzhen Component index finished down 0.82 per cent to 10,669.51. The Shenzhen Composite Index lost 0.76 per cent to 2,017.46. The Nasdaq-style ChiNext fell 0.48 per cent to 2,181.33.

Langfang Development Co, of which China Evergrande Group is a major investor, saw shares tumble 9.92 per cent to 29.43 yuan. The Shenzhen-shares of China Vanke Co, the country’s largest residential developer, slid 5.98 per cent to 23.44 yuan.

Analysts said stock markets have been playing a guessing game on when the Federal Reserve would raise rates after top Fed officials, including Fed chair Janet Yellen, turned more hawkish recently on the back of a slow but steady economic growth.

If Friday’s US non-farm payrolls data for August are strong, expectations may grow over a potential rate rise in September, putting pressure on the market, Yip said.

Nonetheless, what matters the most is still the Federal Open Market Committee meeting scheduled on September 22, when the policy makers are set to make the rate decision, he added.

Additional reporting by Celia Chen

jennifer.li@scmp.com