China stock market

Hong Kong, Chinese stocks rebound by the close as trade lightens in front of New Year

Offshore yuan continues to weaken while onshore yuan strengthens end of trade

PUBLISHED : Tuesday, 29 December, 2015, 9:28am
UPDATED : Tuesday, 29 December, 2015, 6:51pm

The Hong Kong stock market rebounded gently on Tuesday in thin turnover while mainland Chinese markets also gained from a rout as investors calmed down from the selling frenzy seen on Monday.

The Hang Seng Index rose by 0.36 per cent, or 80 points, to settle at 21,999.62. The H-share Index tracking mainland based companies closed nearly flat at 9,788.91, 0.01 per cent or 0.55 points lower.

Total market turnover in Hong Kong declined to HK$38.32 billion from HK$41.52 billion on Monday, compared with the average daily turnover of HK$109.9 billion in the first 11 months of this year.

Meanwhile, the offshore yuan continued weakening, easing to 6.5752 against the US dollar around 3 pm, after it touched a four-year low on Monday, while the onshore yuan closed at 6.4849, 0.03 per cent stronger from Monday’s level.

Kevin Leung, director of global investment strategy at Haitong International Securities, said the recent weakening of the yuan would impact some companies’ annual earnings, especially those with small currency hedging, but the impact over the general Hong Kong equity market will be limited.

“Most of the investors will hold their money during this holiday season, and wait for more information to adjust portfolios. Historically speaking, trade will be flat until the lunar New Year,” Leung said.

KGI Asia executive director Ben Kwong said the Hong Kong market continued to lack direction in the run up to the New Year holiday, and instead was being pulled along by regional trends.

“When Asia’s market is up, Hong Kong is up and when it’s down, Hong Kong is down a bit,” he said. “The turnover is continuing to drop - so investors are preferring to stay on the sideline ahead of the long holiday.”

All markets in Hong Kong and China are shut on Friday for New Year, reopening for business on Monday, January 4. Hong Kong will close early by midday on Thursday. The Lunar New Year will be celebrated in 2016 in early February.

The Hong Kong benchmark is on track of losing roughly 6 per cent from last year-end, while the Shanghai benchmark in on track of gaining about 10 per cent.

Kwong said Monday’s rout in US-dollar denominated mainland stocks, or B-shares, had been a standard market correction after strong gains in previous months.

“[Now] I think it will just hover about the 22,000 level and investors will focus on individual stocks for short-term trading,” he said.

On the other hand, Shanghai and Shenzhen both ended higher, after enduring on Monday the largest single day loss in a month as B-shares slid by 8 per cent.

The Shanghai Composite Index gained 0.85 per cent, or 29.96 points to close at 3,563.74, while the Shenzhen Component Index advanced by 0.95 per cent, or 21.98 points to 2,330.36. The Nasdaq-style ChiNext Index rose 0.52 per cent, or 14.34 points to 2,749.82.

The B-share index in Shanghai rebounded by 2.53 per cent, or 10.33 points, to 418.10. On Monday, aggressive profit-taking hammered after the index had risen 70 per cent in the past three months.

“Currently, investors are mainly concerned that the dense new offerings and cash out by big stake holders in January will soak up the capital on the equity market. But clearly the sell-off may be overdone,” said Deng Wenyuan, an analyst with Soochow Securities.

“The chance is small for a continuous slump in the A-share market, although it is likely that trade may fall flat as the holiday seasons approach.”

The China Securities Regulatory Commission, the mainland’s securities watchdog, banned selling of shares by big stake holders of listed companies on July 8, following a severe sell-off which hit Chinese markets after they had staged a robust rally which enabled equities to scale a seven-year top. That ban expires on Friday, January 8.

PetroChina, Sinopec, and CNOOC saw their share price slightly down in Hong Kong after prices of US crude fell over 3 per cent overnight while Brent crude hovered near 11-year lows before stabilising.

Evergrande Real Estate Group gained 4.60 per cent to HK$6.60 in Hong Kong. The company announced on Tuesday it had agreed to buy property projects in Guiyang and Chengdu from New World China Land for a total of 7.3 billion yuan (HK$8.73 billion).

It will also buy properties and commercial-residential land in Shandong province from Chow Tai Fook Enterprises for 2 billion yuan and a low-density residential land in Shanghai for 3.5 billion yuan.

Both New World China Land and Chow Tai Fook Enterprises are controlled by Hong Kong tycoon Cheng Yu-tung.