Southbound inflows push Hang Seng Index to 19-month high
Blue chips Tencent and China Mobile to announce annual results this week
Hong Kong stocks surged to a 19-month high on Monday, as southbound capital flow from the mainland hit the highest level in 15 days, taking red-hot internet stocks on a roller-coaster ride.
The Hang Seng Index closed 0.8 per cent or 192 points higher at 24,502, its best level since mid-August 2015, with Hang Seng China Enterprises Index rising 0.7 per cent to 10,583.98. Trading turnover fell 19 per cent from Friday to HK$97.8 billion.
Beauty app Meitu saw its shares jump as much as 28 per cent on Monday to a historic high since December’s listing, at HK$23.05, but they then fell off a cliff in the afternoon to end at HK$16, down 11.2 per cent.
Meitu’s turnover reached HK$3.8 billion, the third highest among eligible stocks under the Shanghai-Hong Kong Stock Connect scheme, next only to heavyweights Tencent Holdings and China Mobile.
IGG, a mobile game developer, saw its shares soar as much as 16 per cent before sliding to close at HK$7.90, a rise of 3.4 per cent.
“Obviously mainland institutions were speculating on those stocks. They’ve been pushing up Meitu stocks [for two weeks],” said Ivan Li Sing-yeung, head of research at Sinopac Securities. “There was a stampede in the afternoon as the valuation became so outrageous compared with its fundamentals.”
Meitu’s share price has now surged 58 per cent since March 6. The company will post its annual results on March 24. Analysts expect it to record 667 million yuan (US$96.7 million) net loss, compared with 2.2 billion yuan net loss a year earlier, according to a poll by Bloomberg.
The net southbound capital flow, through the stock connect schemes with Shanghai and Shenzhen, reached 3.7 billion yuan, the highest in the last 15 trading days, according to preliminary data from AASTOCKS.com.
“The inflow is likely to remain high,” Li said. “Sectors like energy and mainland banking may be their next targets, but there is less momentum for Hang Seng to climb higher now.”
Investors were also optimistic on some blue-chip companies that will report earnings this week, said Hannah Li, a strategist at UOB Kay Hian.
“The market is extremely active,” Li said. “A large amount of capital is also flowing into sectors with good fundamentals, such as coal mining and telecommunications.”
Tencent, which is due to post its results for 2016 on Wednesday, rallied 2.8 per cent to a new high of HK$228.20, while China Mobile rose 3.7 per cent to HK$90.40 ahead of its earnings report on Thursday.
Shares in China Shenhua Energy, the listed flagship of the nation’s largest coal producer, Shenhua Group, rose as much as 16.3 per cent to HK$19.10 after its board declared a dividend payout of more than double its net profit for last year, following a 41.1 per cent rise in net profit for 2016.
Property stocks, however, lagged amid fears of more measures to cool down mainland home markets.
In the mainland, the benchmarks booked slight gains. The Shanghai Composite Index was up 0.4 per cent, or 13.4 points, at 3,250.8 while the blue-chip CSI 300 edged up 0.1 per cent to 3,449.6.
The Shenzhen Component Index closed 0.2 per cent higher at 10,532.3, and the Nasdaq-style ChiNext gained 0.2 per cent to 1,953.8.