Mainland China and Hong Kong stocks rise as risk appetite picks up
Investors almost use up Hong Kong-Shanghai Stock Connect’s daily quota
The mainland China and Hong Kong stock markets closed higher on Monday, after the mainland’s top market regulator sent stabilising signals, and as sentiment improved amid a global risk-on revival.
Investors almost used up the northbound and southbound daily quotas under the Hong Kong-Shanghai Stock Connect Scheme.
By the close, 94 per cent of the 13 billion yuan northbound daily quota had been used, and 92.3 per cent of the 10.5 billion yuan southbound daily quota, official data showed.
The mainland’s benchmark Shanghai Composite Index rose 1.75 per cent to close at 2,859.50. The Nasdaq-style ChiNext surged by 4.56 per cent to 2,023.13 in Shenzhen. The CSI 300 Index, tracking blue chips in Shanghai and Shenzhen, rose 1.57 per cent to 3,065.69.
Liu Shiyu, the newly appointed chairman of the China Securities Regulatory Commission (CSRC) said at his first press conference on Saturday that he would not consider withdrawing the funds invested in the stock markets by the authorities in the near future.
Goldman Sachs estimates the central government has injected more than 1.5 trillion yuan to bolster the markets since they crashed in late June, sending the Shanghai Composite Index plunging 32 per cent from a seven-year high.
Liu also said he would not push forward hastily with registration-based reform of the initial public offering system.
Alex Fan, managing director of GF Securities in Hong Kong, said sentiment had temporarily improved, but reforms meant to solve structural problems with China’s economy did not seem to be progressing.
“The mission of housing destocking seems to have made no progress,” he said. Meanwhile, the reform of state-owned enterprises is also very slow – cutting overcapacity is very challenging as it directly affects employment and social stability.”
Hong Kong’s benchmark Hang Seng Index closed 1.17 per cent higher at 20,435.34, while the Hang Seng China Enterprises Index rose 1.46 per cent to 8,686.27.
Russ Koesterich, BlackRock’s chief investment strategist, said in a note on Monday that “stocks have staged an impressive rebound from the February lows over the past four weeks”.
The European markets rallied on Friday after the European Central Bank announced an expansion of stimulus.
However, given the still uneven pace of global growth and tighter financial conditions, equity market volatility could rise, Koesterich said.
Louis Wong, director of Phillip Capital Management, said infrastructure and construction-related stocks were driving the Hong Kong market.
“MTR Corp announced investment in key infrastructure projects has reached five trillion yuan,” he said. “Market turnover reached nearly HK$40 billion, the rally today is well supported by good turnover ... I do expect the Hang Seng Index to test the 20,600 level in the near term.”
China Vanke surged 9.99 per cent to HK$20.15 after it announced that subway operator Shenzhen Metro would become one of its major shareholders by injecting property projects worth up to 60 billion yuan.
Citic, China’s largest state-backed conglomerate, lost 2.60 per cent to HK$12 after announcing a restructuring plan with China Overseas Land & Investment.
The dip came after Citic shares soared 9.2 per cent on Friday to HK$12.32, their highest in two months, after a Ming Pao report said the group would sell its entire real estate business to China Overseas Land.
Citic announced on Monday morning that it would sell around 31 billion yuan worth of mainland residential property projects to China Overseas Land in exchange for a 10 per stake in the property giant and 6.15 billion yuan of its commercial properties.
Additional reporting by Naomi Ng and Eric Ng