Hong Kong shares rebound from seven-week low, Tencent rises
Hong Kong shares bounced off a seven-week low on Monday, supported by Tencent after US jobs data on Friday eased some jitters about the Federal Reserve paring its massive stimulus in the near term.
But index gains came in anemic turnover, with any respite for cyclical counters seen short-lived. Positive comments from China Premier Li Keqiang, despite soft May data over the weekend, suggest Beijing will abstain from stimulating growth.
The Hang Seng Index ended up 0.2 per cent at 21,615.09 points. Last week, its worst weekly loss in more than a year had pushed the benchmark to its lowest closing level since April 18. It is still down 8 per cent from a May 20 peak.
The China Enterprises Index of the leading Chinese listings in Hong Kong was down 0.6 per cent. Mainland Chinese markets are shut for a three-day Dragon Boat Festival holiday. Hong Kong will also be closed on Wednesday.
“People have adjusted expectations for China growth, but I don’t think they are adjusted to the new reality and how that will play out in the market,” said Hong Hao, chief strategist at Bank of Communication International Securities.
“In this new reality, you can’t just pile on investment to stimulate growth because of significant leverage and the Chinese economy may not respond to interest rate cuts,” Hong added, suggesting stock markets in Hong Kong and China could correct a further 20 per cent from current levels within the next six months.
Air China dived 6.4 per cent to a six-month low after UBS analysts downgraded its H-share listing by two notches from “buy” to “sell”. They said a decline in passenger yields was larger than expected due to a supply-demand imbalance, which has offset the benefits of declining jet fuel prices.
Hong Kong shares of Beijing-based Air China are now down 13 per cent on the year, broadly in line with an 11.4 per cent fall on the China Enterprises Index. It is trading at a 30 per cent discount to both its 12-month forward earnings multiple and price-to-book value, according to Thomson Reuters StarMine.
Hong Kong airliner Cathay Pacific rose 2.8 per cent while Chinese Internet giant Tencent Holdings gained 1.8 per cent and were among leading boosts to the Hang Seng benchmark.
Chinese banks were broadly stronger buoyed by May lending data that was broadly in line with expectations, although total social financing, a broad measure of bank and non-bank lending in China, dipped significantly in May from April.