Daily Report

Shanghai, Hong Kong stocks notch gains as Fed changes tact on additional rate hikes

ChiNext board of high-tech stocks surges 5.5 per cent

PUBLISHED : Thursday, 17 March, 2016, 9:04am
UPDATED : Thursday, 17 March, 2016, 5:21pm

Hong Kong and mainland China stock markets rose on Thursday, buoyed by a dovish tone on future interest rate hikes from the US Federal Reserve at the conclusion of its March meeting.

Investors pushed the Nasdaq-style ChiNext Index in Shenzhen up by 5.55 per cent to 2,087.29, amid talk that authorities had relaxed restrictions on the use of leverage.

The Shanghai Composite Index ended the session 1.2 per cent higher, adding 34.40 points to 2,904.83. In Hong Kong, the Hang Seng Index rose 1.21 per cent, or 246.11 points to 20,503.81. Hong Kong’s Hang Seng China Enterprises Index, tracking mainland based companies, rose 2.36 per cent to 8,773.83.

On Wednesday overnight, Fed Chairwoman Janet Yellen announced new projections that indicated the number of interest rate hikes would be lowered to two from four this year.

Alex Wong Kwok-ying, asset management director of Ample Capital, said the Hong Kong stock surge was in reaction to the Fed’s decision to keep interest rates steady. However, he cautioned that the uptrend would be short lived.

“We are having an upside break today, but the momentum is weak. People remain cautious and turnover remains low,” said Wong. “Basically this is a short-term boost, [and] cannot turn the sentiment bullish.”

Sentiment also remained slightly shaky on the mainland, with some analysts saying outflows of capital have kept the markets under pressure. fund lA-share market.

“Recently capital have been flowing out of the stock market, rather than flowing in, amid a bearish trading atmosphere,” said Eric Wu, a Shanghai based hedge fund analyst.

He said some banks have raised the leverage ratio on margin trading accounts.

Sources with China Merchants Bank said on Thursday that they had raised the leverage ratio such that investors can trade 3 yuan worth of stock for every 1 yuan in their trading accounts.

Turnover on the ChiNext board surged to 112.18 billion yuan (HK$133.96 billion) on Thursday, almost doubled from Wednesday’s 69.96 billion yuan.

Meanwhile, the Shenzhen Composite Index advanced 3.56 per cent to 1,772.43.

Leading sectors included software, health care, and information technology.

In Hong Kong, China Unicom jumped 9.07 per cent to close at HK$9.98 after announcing it would accelerate tis 4G mobile network roll-out across China to revamp its brand image even as it reported a widely expected decline in 2015 earnings.

Its rival China Mobile, shed 2.09 per cent to close at HK$ 84.55, after it reported 2015 net profit edged lower from a year earlier.

Both telecoms were among the most heavily traded shares in Hong Kong on Thursday.

Wong said investor sentiment was cautious amid concerns over China’s economic outlook.

“Basically I think people are not too committed. We probably may just consolidate within a range for some time,” said Wong.