Update | Hong Kong and Shanghai hit new 7-year highs as HSBC, China oil majors spark charge

Hong Kong and Shanghai surged on Monday morning to trade at new 7-year highs, deriving inspiration from a rally in both the US and European markets along with reports that caused prices of mainland Chinese oil majors and HSBC to spike sharply higher.

The benchmark Hang Seng Index climbed by 365.74 points, or 1.30 per cent, to end at 28,426.72 by the midday break, the strongest since December 12, 2007. The Hang Seng hit an intra-day peak at 28,529.45.

The Hang Seng China Enterprises Index went up 130.92 points, or 0.90 per cent, to 14,619.91 before the lunch break.

The Shanghai Composite Index added 82.00 points, or 1.87 per cent to 4,475.69, the highest level since February 21, 2008, having traded at a session peak of 4,504.38.

Trading volume of mainland Chinese stocks through the stock connect scheme stood at 5.68 billion yuan and investors had used up just 8 per cent of the daily quota. Trade volume of Hong Kong stocks by mainland investors stood at 5.34 billion yuan and investors had used up 13 per cent of the daily quota.

“It might be worthwhile to look at companies that might be bought ‘southbound’ by China mutual funds but not necessarily H shares,” noted Jeffries analysts led by Sean Darby.

Chinese oil stocks jumped due to a mainland news report that the State Council is mulling on merging the three oil giants, PetroChina, Sinopec and CNOOC, into one company. PetroChina advanced the daily limit of 10 per cent to 14.65 yuan in Shanghai and 4.9 per cent to HK$10.46 in Hong Kong, respectively.