Hong Kong Stock Exchange

Hong Kong, mainland stocks close higher as Beijing economic plan boosts sentiment

Hang Seng Index ends up 0.18 per cent at 23,596, while the Hang Seng China Enterprises index gains 0.26 per cent to 10,171

PUBLISHED : Monday, 06 March, 2017, 9:24am
UPDATED : Monday, 06 March, 2017, 6:15pm

Mainland stocks ended higher on Monday after the Chinese government vowed to support innovation and carry forward economic reforms at the opening of its annual parliamentary meeting.

Hong Kong closed marginally higher with the almost-certain prospect of an interest rate rise in the US weighing on the city’s property giants.

The Hang Seng Index closed up 0.18 per cent, or 44 points, to 23,596 on Monday, while the Hang Seng China Enterprises index gained 0.26 per cent, or 27 points, to 10,171.

Rate-sensitive property shares were hurt by concerns that the upcoming US interest rate rise will hurt Hong Kong’s real estate market. Cheung Kong Property fell 0.87 per cent to HK$51.1 while Sun Hung Kai Properties shed 0.89 per cent to HK$112.0.

US Federal Reserve Chair Janet Yellen dropped her biggest hint yet last Friday that the central bank will raise interest rates at its next meeting on March 14-15.

“Faster rate hikes are good news for the US market, because it shows the Fed is confident about its domestic economy,” said Hannah Li, an analyst for UOB Kay Hian.

“But the move can be negative for Hong Kong stocks, since money will be put into dollar-denominated assets.”

She added that the Chinese government’s plans to spend on transportation infrastructure and cut excessive capacity have been taken positively by investors.

Energy and technology stocks led the gains in Hong Kong, with the largest state-owned Chinese coal-mining company China Shenhua Energy advancing 1.6 per cent to HK$16.3 and local acoustics supplier AAC Technologies rising 2.9 per cent to HK$85.3.

Premier Li Keqiang also told the country’s annual parliamentary gathering – the Chinese People’s Consultative Conference – on Sunday that China must remain alert to bad loans and shadow banking and erect a “firewall” against financial risks.

“But overall there was little surprise,” analyst Hannah Li said. “The speech did not cause any big moves in the market as people had been expecting the 6.5 per cent target and the reform plans.”

The Shanghai Composite Index closed the day up 0.48 per cent at 3,234, while the CSI 300 – which tracks the large caps listed in Shanghai and Shenzhen – was up 0.54 per cent at 3,446. The Shenzhen Component Index added 1.20 per cent to 10,522.

The tech-heavy ChiNext surged 1.79 per cent to 1,963 after the Chinese premier pledged to support innovative industries such as new materials, artificial intelligence and the biopharmaceutical sector.

AI company Csg Smart Science & Technology shares rose to its 10 per cent daily limit to 23.4 yuan on Monday, while Shenzhen Sunwin Intelligent Co also saw its shares up 10.02 per cent to a three-month high of 18.01 yuan. Coal-mining and robotics companies also contributed to the gains on the mainland bourse.

The Chinese People’s Political Consultative Conference (CPPCC) opened on Friday and then it will turn into of the National People’s Congress (NPC).

“A-shares tend to do well in the run-up to the CPPCC and shares are weak during the week of the NPC; however, afterwards, both equity classes show absolute returns,” said Sean Darby, chief global equity strategist with US brokerage firm Jefferies, in a note on Monday.

The two bodies meet in what is known as the ‘two sessions’ for a period of about two weeks.

“One area that might surprise investors is if the People’s Bank of China finds itself forced into some form of monetary tightening.”

US stocks recorded moderate gains on Friday, with the Dow Jones Industrial Average index adding 2 points to 21,005 and the Nasdaq Composite gaining 9 points to close at 5,870.

Other Asian markets showed mixed performances. The Nikkei 225 in Japan dropped 0.46 per cent to 19,469 after three of the four ballistic missiles fired by North Korea fell into Japan’s exclusive economic zone. The Kospi in South Korea rose a a slight 0.13 per cent to 2,081 while Australia’s S&P/AXS 200 gained 0.30 per cent to 5,747.