Hang Seng Index

Hong Kong stocks gain as HSBC hits one-year high

Hang Seng closes up 0.75 per cent at 22,675.15. But Shanghai Composite falls to over two-week low, and Shenzhen Component nears lowest level in four weeks

PUBLISHED : Tuesday, 06 December, 2016, 9:28am
UPDATED : Tuesday, 06 December, 2016, 10:12pm

Hong Kong stocks rebounded on Tuesday, with HSBC reaching a one-year high, while mainland markets retreated on the second day of trading on the newly opened Shenzhen-Hong Kong Stock Connect.

The Hang Seng Index closed up 0.75 per cent, or 169.60 points, to 22,675.15, while the Hang Seng China Enterprises Index added 0.59 per cent or 57.05 points, to 9,768.85.

Overall market turnover was at HK$60.67 billion, and trading volume was at 1.3 billion, below the five-day average of 1.97 billion.

The low turnover reflects investors’ unwillingness to enter the markets, according to Castor Pang Wai-san, head of research at Core Pacific-Yamaichi International (HK), with so many global economic uncertainties still dragging down sentiment.

“We continue to see the market is just [seeing a] rebound following the US market gains,” he said.

All three major US indexes closed higher the day before on rising crude oil prices, and data showing a one-year high for the US services sector in November.

HSBC Holdings roared ahead 3.18 per cent to HK$63.25, its highest level in 52 weeks, leading the Hang Seng gainers, after long-time bear Morgan Stanley double upgraded the stock from underweight to overweight.

The broker was previously bearish on concerns HSBC wouldn’t be able to maintain its generous dividend payouts amid sluggish revenue growth. However, HSBC has large operations in Hong Kong, whose currency is pegged to the US dollars. And since Donald Trump‘s presidential win, US government bond yields have been rising, pushing Hong Kong’s interest rates up as well.

The upbeat assessment pushed other bank stocks higher too, with China Construction Bank adding 0.69 per cent to HK$5.83, and both ICBC and Bank of China Hong Kong gaining 1.05 per cent.

Insurance stocks also moved higher. China Life rose 3.48 per cent to HK$22.30 as the second top gainer among the blue chips.

But AIA Group traded lower, losing 0.22 per cent after news that fewer mainland clients were buying insurance in Hong Kong using UnionPay.

UnionPay bans mainlanders from using card to buy insurance investment products in Hong Kong

Property stocks were mixed ahead of an expected interest rate hike in the US in mid-December.

Sino Land gained 2.39 per cent, but Cheung Kong Property lost ground to finish down 0.59 per cent at HK$50.70.

Investors globally are waiting to see how many basis points the interest rate will increase by, who will make up President-elect Donald Trump’s cabinet, and what the European Central Bank will do, according to Andrew Sullivan, sales trading managing director at Haitong International Securities.

“Everybody knows there’s going to be change ahead,” Sullivan said. “People will start positioning for next year, but they still want to see how many basis points is the Fed going to raise rates.”

Interest in the Shenzhen-Hong Kong Stock Connect, which debuted on Monday, remained subdued, with only 16.98 per cent of the daily northbound quota used.

“The result is not up to the market expectations,” Pang said. “It seems that the benefit from the connect vanished after the commencement.”

It will take some time for investors to get used to the new system, Sullivan said.

In the mainland, major indices continued their retreat.

The Shanghai Composite Index fell to an over two-week low, down 0.16 per cent, or 5.06 points, to 3,199.65 while the CSI 300 was down 0.30 per cent, or 10.26 points, to 3,459.15.

The Shenzhen Component Index continued to slip, nearing its lowest level in four weeks, as it lost 0.04 per cent, or 4.56 points, to 10,779.77. Meanwhile, the Nasdaq style ChiNext slipped 1.01 per cent, or 21.62 points, to 2,122.26.

Insurance companies saw more losses following weekend criticism from the China Securities Regulatory Commission chairman, who called them “barbaric” for the risky practise of acquiring stakes in companies with questionable funds.

China Pacific Insurance dropped 2.90 per cent to 5.56 yuan, while China Life Insurance fell 1.53 per cent to 24.45 yuan.

Online video company LeTV plunged 7.85 per cent to 35.80 yuan, as Pang said tech stocks will likely pull back after increasing substantially over the last two months.

In South Korea, the Kospi rose 1.35 per cent to 1,989.86 amid speculation that President Park Geun-hye would be ousted over a domestic political scandal, which reports confirmed after markets closed.

Park will resign in April, Korea’s Yonhap TV reported, and will accept the outcome of an impeachment vote later this week.

Elsewhere in Asia, Tokyo’s Nikkei 225 gained 0.47 per cent to 18,360.54, while Sydney’s All Ordinaries rose 0.52 per cent.