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Hong Kong stocks gain for 2nd week on further capital inflows from mainland China

Daily average turnover jumps to HK$96 billion this week

PUBLISHED : Friday, 17 February, 2017, 9:28am
UPDATED : Friday, 17 February, 2017, 9:58pm

Hong Kong stocks settled this week above the 24,000 mark and booked a solid weekly gain of 2 per cent, with its daily average turnover up nearly 20 per cent to HK$96 billion, amid expectations that further capital inflows from mainland China may push up the indices further.

The Hang Seng Index pulled back on Friday from a 18-month closing high in the previous session, ending down 0.3 per cent at 24,033.74. However, for the week, it advanced 2 per cent, marking a second weekly rise.

So far this year, the index has climbed 9 per cent.

The Hang Seng China Enterprises Index, which tracks mainland Chinese companies listed in Hong Kong, dropped 0.9 per cent to close at 10,360.13. But it was also up a combined 2.3 per cent for the week.

The turnover dropped to HK$86.3 billion from Thursday’s HK$107.63 billion.

Nonetheless, the average daily turnover for the week rose 18 per cent to HK$96.3 billion. Last week, the number also jumped 48 per cent from the previous week. In a contrast, January’s daily turnover averaged only HK$57.2 billion.

“Hong Kong market is active. We can see there are two days this week when the daily turnover breached HK$100 billion,” said Hannah Li, an analyst for UOB KayHian.

“The rally is money-driven,” she said. “Mainland Chinese investors have become more enthusiastic in Hong Kong-listed Chinese stocks, as the yuan’s depreciation pace has eased and Chinese companies have shown improved earnings outlooks amid a stabilising economy.”

“Some overseas funds may be following suit and buying Hong Kong stocks, pushing up the turnover further,” she added.

Li said these investors have been “hyping up” previous lagging sectors in turns, such as Chinese banks and insurers.

However, she also warned that the stock buying may be short-term trading and investors should watch out for potential risks of a market correction.

“The rally is money-driven. Mainland Chinese investors have become more enthusiastic in Hong Kong-listed Chinese stocks, as the yuan’s depreciation pace has eased and Chinese companies have shown improved earnings outlooks amid a stabilising economy.”
Hannah Li, an analyst for UOB KayHian

In the mainland, the Shanghai Composite Index also ended down 0.9 per cent at 3,202.08. For the week, it edged up 0.2 per cent.

The CSI300, which measures the performance of large companies listed in Shanghai and Shenzhen, fell 0.6 per cent to 3,421.44.

The Shenzhen Component Index dropped 0.6 per cent to 10,197.92. The Shenzhen Composite Index lost 0.7 per cent to 1,945.11. The start-up index ChiNext shed 0.8 per cent to 1,882.87.

Combined turnover for Shanghai and Shenzhen increased 11 per cent to 499.4 billion yuan.

Among individual performers, Hong Kong lender Bank of East Asia tumbled 4.1 per cent to close at HK$33.10 in Hong Kong, after the company posted a 32 per cent decline in net profit for 2016. It was the worst performing blue-chip stock.

Mainland Chinese banks also dropped sharply in Hong Kong, with Bank of Communications down 2.4 per cent to HK$6.13, and China Construction Bank off 1.6 per cent to HK$6.35.

Macau casinos also underperformed. Sands China lost 2 per cent to HK$32.3. The company announced after the market closed that its 2016 net profit dropped 16 per cent year on year. MGM China declined 3.4 per cent to HK$14.14.

However, brokerages firms bucked the weak trend and advanced, after China relaxed curbs on stock index futures.

Chinese broker Luzheng Futures rallied 11.63 per cent to HK$1.92. Rival Holly Futures jumped 4.5 per

cent to HK$1.86. Citic Securities rose 1.2 per cent to HK$17.18.

In the mainland, Poten Environment Group, a service provider for sewage treatment and disposal works, soared by its daily-increase limit of 44 per cent in debut trade to close at 9.71 yuan in Shanghai. The company’s initial public offering price was 6.74 yuan.

Viewshine, which supplies utility meters for residential and commercial properties, also rose 44 per cent to finish at 17.40 yuan on its first day of trading in Shenzhen.

Additional reporting by Celia Chen

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