Update | 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.