Bank of China Hong Kong surges to all-time high, boosting Hang Seng Index
Analysts expect Beijing to reveal supportive policies for Hong Kong around July 1, which marks the 20th anniversary of handover of the British colony to China
Hong Kong stocks gained for the first time in five days on Monday, as financial companies advanced after Morgan Stanley raised its price estimates for Bank of China Hong Kong and on optimism the city’s financial industry will received policy support from Beijing ahead of the handover anniversary.
The Hang Seng Index rose 0.8 per cent, or 201.84 points, to 25,871.89 at the close. The Hang Seng China Enterprises Index, known as the H-shares index, rose 1 per cent, or 100.62 points, to 10,530.66. Mainland China’s CSI 300 Index closed at its highest level in 17 months.
Brokerages including Dongxing Securities expect Beijing to unveil favourable policies to support Hong Kong’s position as Asia’s financial hub in the build-up to the 20th anniversary of the city’s handover to China on July 1. President Xi Jinping is scheduled to attend the anniversary gala on a three-day visit to the city starting June 29, according to the Xinhua News Agency.
“We believe Beijing’s supportive policy [to Hong Kong] is most likely to focus on the financial sector, which should benefit the most local financial industry players with a diverse portfolio of businesses,” said Tan Ke, an analyst with Dongxing Securities.
“Policies related to the 20th anniversary may be the biggest boost for Hong Kong stocks in the near term.”
The People’s Bank of China revealed some detailed rules for the long-awaited Bond Connect scheme last week, allowing overseas investors to buy mainland China’s yuan-traded debt through Hong Kong. However, the launch date has not been announced.
Bank of China Hong Kong (BOC Hong Kong) was the biggest gainer on the Hang Seng Index, surging 6.2 per cent to a record HK$36.80. The rally came after Morgan Stanley reiterated its overweight rating for the stock and raised its target price by 21 per cent to HK$46.
The US investment bank predicted BOC Hong Kong would profit from a wider net interest margin, as interbank borrowing costs for the Chinese yuan, Hong Kong dollar, and US dollar have all moved higher.
Bigger rival HSBC gained 0.7 per cent to HK$68.25, and Hang Seng Bank added 0.4 per cent to HK$161.20.
Chinese financial shares also advanced broadly. China Construction Bank was up 1 per cent to HK$6.17, ICBC rose 0.8 per cent to HK$5.24, Bank of China gained 0.8 per cent to HK$3.84, and China Life Insurance edged up 0.8 per cent to HK$24.40.
On the mainland, the CSI 300 Index advanced 1.3 per cent, or 45.21 points, to 3,668.09, the highest close since December 2015. Trading volumes on the measure were 37 per cent higher than the five-day average on Monday. The gauge rose 3 per cent last week, drawing support from the entry of yuan-traded stocks, or so-called A shares, into MSCI’s key benchmark emerging markets index.
The Shanghai Composite Index added 0.9 per cent, or 27.57 points, to 3,185.44. The start-up board index ChiNext index gained 0.8 per cent.
Among the 222 companies to join MSCI’s benchmarks, Anxin Trust surged by the 10 per cent daily limit to 13.54 yuan in Shanghai and auto parts maker Weifu High-Technology Group also jumped 10 per cent to 26.86 yuan in Shenzhen.
Shenzhen-based companies including China International Marine Containers and China Merchants Shekou Industrial Zone Holdings advanced on expectations that new progress will be made on Beijing’s Greater Bay Area project, which will integrate Hong Kong, Macau and nine cities in Guangdong province for joint development.
China International Marine climbed 6.1 per cent to 17.83 yuan and China Merchants Shekou added 4 per cent to 21.99 yuan.