Stock Talk

Market Wrap: Hang Seng posts longest winning streak since Jan 2011

PUBLISHED : Friday, 19 October, 2012, 6:13pm
UPDATED : Friday, 19 October, 2012, 7:47pm

Hong Kong stocks closed flat on Friday as gains by automakers and home appliances firms were capped by the mainland central bank’s comment that no major economic stimulus measures were in the pipeline.

The benchmark Hang Seng Index added 33.05 points, or 0.15 per cent, to close at 21,551.76. This is the longest winning streak for the gauge since January 2011.

China’s government would not provide big economic stimulus and a strong rebound in growth was unlikely, Song Guoqing, an adviser to the People’s Bank of China, said in a speech on Thursday.

The Hang Seng China Enterprises Index, which tracks the performance of Hong Kong-listed Chinese firms, added 47.36 points, or 0.45 per cent, to finish at 10,683.61.

Yet funds continued to flow out of save-haven sectors like utility firms, reflecting a rising appetite for risk in the market based on speculation that the China’s economy is bottoming out.

“With money supply and credit growth already on the rise, we think monetary policy will stay largely unchanged, [and there will be] no further adjustment in the overall credit quota,” UBS economist Wang Tao said in a research note. The recovery path for the Chinese economy would be “L-shaped”, he said.

PCCW (0008.HK), owned by billionaire Richard Li, rose 2.62 per cent to finish at HK$3.13 after the announcement that it will acquire ING Group’s Hong Kong, Macau and Thai insurance businesses for US$ 2.14 billion. The price is 1.9 times the estimated 2012 book value, according to ING’s press release.

China Railway Construction (1186.HK), China Shipping Container Lines (2866.HK) and China Shipping Development (1138.HK) were among the most shorted stocks of the day, according to data provided by Mankit. China Railway lost 2.26 per cent to finish at HK$7.34. The stock has gained 72 per cent so far this year.

While investors are shorting infrastructure names, which have risen sharply during the past few month after China approved various aggressive infrastructure projects, they are buying in lagging sectors, such as consumer and auto names.

GOME Electrical Appliances (0493.HK), which has lost 49 per cent year-to-date, jumped 7 per cent to finish at HK$0.92, a three-month high. Huiyin Household Appliances (1280.HK) gained 2.94 per cent to finish at HK$0.35.

Cement players extended a rally on speculation that a bottoming-out Chinese economy would boost demand for the material. BBMG (2009.HK) jumped 4.17 per cent to close at HK$6.74.

“This round of cement price and demand recovery was kicked off by seasonal strengthening. However, with further money supply easing and new infrastructure projects kicking off, we believe the demand recovery will be more than a seasonal pick-up,” UBS analyst Mick Mi said in a research note to   clients on Friday.