Hong Kong stocks reverse losses on gains in property, tech sectors

Hong Kong stocks reversed three-days of losses to close higher on Friday, mainly driven by outperforming mainland Chinese property developers and internet companies.

China Evergrande Group, the country’s largest property developer by sales, led the sector, rallying by 9.1 per cent to HK$9.5, its biggest daily gain in more than two months. Country Garden Holdings followed with a 6.1 per cent jump to close at HK$8.2 while Sunac China Holdings added 5.7 per cent to close at HK$11.1.

Liu Feifan, a property analyst at Guotai Junan International, said shares of Country Garden were boosted by its related company Bright Scholar Education’s strong debut performance on the New York stock exchange, with a 27.6 per cent gain overnight.

Evergrande was driven by its much improved debt structure as the company recently secured over 20 billion yuan (US$2.9 billion) in equity financing and loans, Liu added.

Internet related companies also outperformed on Friday in Hong Kong. China’s second largest internet company Tencent increased 1.9 per cent to close at HK$268.4 after reporting better-than-expected earnings on Thursday. China Smartpay Group added 2.7 per cent to close at HK$1.1 and Pacific Online increased 1.1 per cent to close at HK$1.9.

On the whole, Hong Kong stocks saw only small gains on Friday amid fluctuating trading as investors weighed the strength of a rebound in global equities after a rout triggered by uncertainty over US President Donald Trump’s agenda, and also driven by mainland money inflows.

The city’s benchmark Hang Seng Index added 0.2 per cent, or 38.4 points, to 25,174.9, while the Hang Seng China Enterprises Index of Chinese companies trading in the city shed 4 points to close at 10,267.4.

“The benchmark expects to find support at the [important technical level] of 25,000 points and investors should cautiously manage their positions in Hong Kong stocks,” said Li Ning, an analyst from Victory Securities. “The uncertainties in overseas markets eased and US market rebounded slightly, underpinned by robust data.”

Asian markets stabilised after US equities rebounded on Thursday amid better-than-expected economic data including jobless claims and regional manufacturing, though concerns still persisted over whether Trump will be able to deliver on his promised financial reforms and infrastructure spending.

“What’s happening in the US is likely to only cause short-term turmoil here,” said Dai Ming, a fund manager at Hengsheng Asset Management. “After that settles, investors will have their eye back on China’s economic fundamentals.”

Strong mainland capital inflows into Hong Kong have driven the benchmark to around a 21-month high. On Friday, about 25 per cent of the daily quota under the Shanghai-Hong Kong Stock Connect, where mainland investors can buy Hong Kong equities, had been used.

However, market turnover on Hong Kong’s main board dropped to HK$70.1 billion on Friday, down 23.6 per cent from Thursday’s HK$91.8 billion.

In terms of weekly performance, Hong Kong stocks closed almost flat for the third week of May, with the Hang Seng index up 0.07 per cent compared to the second week.

Mainland stocks are lagging Hong Kong stocks this year as increased scrutiny in the financial sector has prompted Chinese investors to move to equities in the former British colony through the exchange link programmes. Even after a 15 per cent gain in the Hang Seng Index this year, the city’s shares are still 16 per cent cheaper than yuan-traded equities, according to a measure tracking the price difference between the two markets. The Shanghai Composite has slid 0.5 per cent so far in 2017.

On Friday, the Shanghai composite index was flat at 3,090.6 while the Shenzhen Component index dropped 3 points to close at 9,971. The ChiNext gauge of smaller firms fell for the second day, down 0.7 per cent on Friday, ending a five-day winning streak up to Wednesday.

Oil drilling companies including China Oilfield Services and Sinopec Oilfield Service advanced in the mainland and Hong Kong after China succeeded in extracting methane gas from the sea, tapping a potential new source of energy.

China Oilfield Service gained 10 per cent on Friday to close at 13.2 yuan in Shanghai and the stock added 3.6 per cent to HK$7.1 in Hong Kong. Sinopec Oilfield surged by the 10 per cent daily cap to 3.7 yuan in Shanghai, and jumped 8.7 per cent to HK$1.4 in Hong Kong.

Haimo Technologies Group surged 10 per cent to 10.2 yuan in Shenzhen and China Oil HBP Science and Technology climbed 5.5 per cent to 7.3 yuan.

For the first time, Chinese engineers collected methane from so-called “flammable ice” – methane hydrate, where the gas is trapped in ice crystals – and converted it into natural gas on a floating production platform in the South China Sea, the Ministry of Land and Resources said on Thursday.

China is joining the US and Canada in tapping methane hydrate, of which the total amount could exceed the combined energy content of all other fossil fuels.

The technical breakthrough is expected to bolster sentiment in the oil-service industry in the long run and offers buying opportunities, analysts including Liu Xiaoning at Shenwan Hongyuan Group wrote in a report on Friday.

Additional reporting by Zhang Shidong and Summer Zhen

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