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Hong Kong stocks log highest close in more than a year on better China data, easing US rate increase fears

Mainland stocks extend gains after modest improvement in China’s manufacturing, services sectors

PUBLISHED : Monday, 05 September, 2016, 9:14am
UPDATED : Monday, 05 September, 2016, 11:00pm

Hong Kong stocks extended their bullish streak to a third straight session and closed at the highest level in more than a year on Monday, after economic data signalled an improving outlook for the Chinese economy, while concerns also eased on an imminent rate increase by the US Federal Reserve following weaker-than-expected American jobs data.

The benchmark Hang Seng Index climbed 1.7 per cent or 382.85 points to close at 23,649.55, the highest close since August last year. The index has risen for three straight sessions in a row. The Hang Seng China Enterprises Index, or the H-shares index, rose 1.5 per cent or 143.69 points to 9,830.57.

Turnover for the Hong Kong market stood at HK$77 billion, slightly lower than Friday’s HK$81 billion.

In the mainland, the benchmark Shanghai Composite Index added to gains in the previous session and edged up 0.2 per cent to finish at 3,072.1 points. The CSI300, which tracks the large caps listed in Shanghai and Shenzhen markets, picked up 0.2 per cent or 5.57 points to 3,319.68.

Among other indices, the Shenzhen Component Index rose by 0.5 per cent or 55.03 points to 10,695.45, the Shenzhen Composite Index by 0.4 per cent or 8.81 points to 2,018.10, and the startup board ChiNext Index by 0.6 per cent or 11.84 points to 3,182.69.

Gains in the stock indexes came after concerns about interest rate increases in the US eased significantly, said analysts.

“Market expectations appeared to have cooled off on a September rate increase after the US non-farm payrolls for August came in weaker than expected, ” said Larry Jiang, chief strategist for Guotai Junan International in Hong Kong.

“US stocks, oil and gold futures all gained at the end of last week, while the US dollar weakened, as investors expected the US Fed to hold off on tightening monetary policy in the near term,” he said.

On Friday, the US Labor Department said the US economy added about 151,000 jobs in August, below the consensus estimate of 180,000.

Moreover, analysts said Chinese stocks received a boost from recently-released Chinese economic data, which pointed to a modest improvement in the manufacturing and services sectors.

On Monday, the Caixin Services Purchasing Managers’ Index (PMI), a privately-produced gauge of China’s services activity, rose to 52.1 in August from 51.7 in July. Last week, official data also indicated that the manufacturing PMI for August rose to the highest reading in more than two years, beating market forecasts.

“Recent signs showed the Chinese economic output has improved recently, mainly due to the government’s supportive measures in various industries, including the financial sector,” analysts from Haitong International said in a research report on Monday.

“Looking forward, we expect the economy to maintain a stable and modest growth in the second half of the year, which should continue to boost investor sentiment in stock markets, ” they added.

Hong Kong stocks may fluctuate in the short term, the Haitong analysts said, as investors have already priced in the positive economic data. However, from a long-term perspective, they are optimistic that Hong Kong stocks will continue their upward march in the second half.

Another driving factor of market performance is the expectation on when the US Fed may start tightening its monetary policy, Haitong analysts said.

They anticipated the next rate increase to take place in December or next year.

In addition, a possible rise in oil futures, eased depreciation pressure on the Chinese yuan, and the launch of the Shenzhen-Hong Kong Stock Connect in the fourth quarter could also bolster stocks in the coming quarters, Haitong analysts said.

“We believe there will be obvious fund inflows into relevant sectors around October due to the optimism on the Shenzhen stock connect at the end of this year,” they said.

In Hong Kong, blue-chips posted broad gains. Chinese online major Tencent Holdings was the most heavily-traded stock, with a turnover of HK$3.9 billion. Its shares added to recent gains and jumped 4.2 per cent to HK$210.2, the highest close on record. Last month, Tencent reported a 52 per cent jump in revenues for the second quarter. Its first-half revenues increased 48 per cent from the same period last year.

Sino-British Banking giant HSBC was also among the top gainers and rose 1.6 per cent to HK$59.95.

Hong Kong property developers gained on pared expectations of a near-term US interest rate increase. Sun Hung Kai Properties climbed 4.6 per cent to HK$117.1, while Cheung Kong Property rose 2.3 per cent to HK$56.

Oil shares advanced on the back of rising crude futures. Cnooc gained 2.1 per cent to HK$9.62, PetroChina by 1.2 per cent to HK$5.24 and Sinopec by 1.1 per cent to HK$5.68.

In the mainland, steelmakers were among the outperformers, as Beijing Shougang surged by its daily limit of 10 per cent to 5.68 yuan. Sansteel Minguang rose 6 per cent to 8.88 yuan and Angang Steel by 2 per cent to 4.56 yuan.