Hong Kong, mainland stocks rise on expectation financial crackdown will soften
Hong Kong and mainland stocks remained robust on Monday on optimism that regulators will temporarily soften their clean-up of the financial industry and as investors weighed the strength of China’s economy.
The Hang Seng Index, the city’s benchmark, rose for a fifth straight trading day, up 0.9 per cent or 215.3 points to close Monday at 25,371.6, the highest level since July 24, 2015, while the Hang Seng China Enterprises Index of Chinese companies trading in the city, added 1.6 per cent, or 167.7 points, to 10,450.4.
In an editorial, the official Xinhua News Agency said China should avoid creating new risks when dealing with existing financial market risk, and brokerages including Citic Securities said it expected the crackdown on financial leverage to enter a “mild period” when the tougher first stage of scrutiny comes to an end.
“The regulatory crackdown will be conducted at a measured and controlled pace in the future,” said Wu Kan, a fund manager at Shanshan Finance. “It won’t be as violent as what we’ve just experienced. So that’ll help to ease the market sentiment.”
The news benefited the banking sector the most in Hong Kong, with Bank of China rising 2.4 per cent to close at HK$3.9, while China Construction Bank increased 1.7 per cent to close at HK$ 6.5. China Merchants Bank added 2.6 per cent to close at HK$21.4 while Agricultural Bank of China climbed 1.9 per cent to close at HK$3.7.
Shipping and port companies also outperformed on Monday in Hong Kong amid high expectations of China’s “Belt and Road Initiative” after Beijing started a two-day summit on the nation’s flagship global trade development scheme on Sunday.
At the conference, which has attracted leaders from 29 countries, President Xi Jinping pledged an additional 100 billion yuan ($14.5 billion) for the Silk Road Fund to support the initiative.
Orient Overseas International added 5.7 per cent to close at HK$43.9 while Pacific Basin Shipping rose 2.2 per cent to close at HK$1.4.
Insurance companies also gained on expectations that rising yields in the bonds market will boost returns on their new investment in debts. Ping An Insurance Group and China Pacific Insurance both added 1.6 per cent to close at HK$46.8 and HK$25.0 respectively.
However, analysts from KGI Securities warned that the dismissal of FBI director James Comey by US President Donald Trump would dampen investor sentiment. “The political uncertainties may come from the controversial decision and will put downside pressure on global markets,” the analysts noted in a report.
In the mainland, stocks gained for a third day on Monday, led by internet companies. Bluedon Information Security Technologies led the gains in mainland stocks, up 10 per cent to reach its daily limit at 11.6 yuan after a ransomware attack on computers around the world spread to China. Suzhou Anjie Technology added 7 per cent to close at 51.4 yuan while Dawning Information Industry increased 4.9 per cent to close at 25.4 yuan.
The cyber-attacks have spread to roughly 100 countries, seizing control of affected computers and demanding the victims pay a ransom.
The Shanghai Composite Index rose 0.2 per cent, or 6.7 points, to 3,090.2 on Monday, a third consecutive day of gains, while the CSI 300 – which tracks the large caps listed in Shanghai and Shenzhen – was up 0.4 per cent to 3,399.2.
The Shenzhen component index added 0.6 per cent or 57.6 points to close at 9,845.6 while the composite index advanced 0.4 per cent to 1,827. The Nasdaq-style ChiNext rebounded 0.2 per cent after slumping last week to a level lower than the 2015 stock crash.
Economic data released by the statics bureau on Monday morning point to a slowdown. Industrial output rose by a slower-than-estimated 6.5 per cent in April, compared with a 7.6 per cent expansion a month earlier. Fixed-asset investment and retail sales also weakened and missed expectations.