Hong Kong stocks rally to a fresh 19-month high as investors bet on strong company profits

PUBLISHED : Tuesday, 21 March, 2017, 9:03am
UPDATED : Tuesday, 21 March, 2017, 10:42pm

Hong Kong stocks ended higher on Tuesday, setting a fresh 19-month high as investors continued to bet on upbeat corporate earnings amid strong capital inflows from the mainland.

The Hang Seng Index rose 0.3 per cent or 71.4 points to 24,573.4, the best closing level since mid-August in 2015. The Hang Seng China Enterprises Index rose 0.6 per cent to 10,644.2, its highest since early November, 2015.

Insurance, infrastructure, and property stocks led the gains.

Ping An Insurance (Group) Company of China rose 1.8 per cent to HK$44.2, the second best performer among blue chips. Sino Land Company, the best performing blue chip, rose 2.7 per cent to HK$13.9.

Tencent Holdings gained 0.3 per cent to HK$228.6, a record high.

China Communications Construction Company outperformed its H-share peers by rising 4.4 per cent to HK$11.5.

Several heavyweight blue chips are scheduled to post their earnings on Wednesday, including Tencent, Ping An, CK Hutchison Holdings and Cheung Kong Property Holdings.

Investors have become more active in trading stocks after the US Federal Reserve raised interest rates last week, in line with expectations, Linus Yip, chief strategist at First Shanghai Securities said.

“The short-term uncertainties are gone,” he said. “Now the Hong Kong market seems steady and positive.”

Southbound capital flows through the Shanghai and Shenzhen Stock Connect were 3.57 billion yuan, the second best level in the past 15 trading days, but down 4 per cent from Monday’s level, according to preliminary data from AASTOCKS.

Local developer K Wah International jumped 2.6 per cent to HK$5.1, its best closing level since August 2014, after posting a 113 per cent rise in core profit for 2016.

Tissue paper maker Hengan International Group Company tumbled 6.7 per cent to HK$63.1. At midday the company reported net profit rose 10 per cent, although revenue was up a modest 3.3 per cent.

Beauty app maker Meitu, which took a roller-coaster ride before closing 11 per cent down on Monday, plunged a further 8.6 per cent to HK$14.6, amid media reports that regulators asked brokerage houses for trading record of the stock that was included in Shenzhen Hong Kong Stock Connect earlier this month.

It is scheduled to announce annual results on Friday.

Mainland shares extended their rising streak for a second day. The Shanghai Composite Index ended up 0.3 per cent at 3,261.6 while the blue-chip CSI 300 rose 0.5 per cent 3,466.4.

The Shenzhen Component Index edged up 0.5 per cent to 10,586.6, and the Nasdaq-style ChiNext climbed 0.4 per cent to 1,961.1.

Liquor and coal sectors led the rally.

China Shenhua Energy, the listed flagship of the nation’s largest coal producer, Shenhua Group, jumped 8.3 per cent to 19.9 yuan, adding to Monday’s 10 per cent gain, after its board declared a dividend payout of more than double its net profit for last year. The company reported a 41.1 per cent rise in net profit for 2016.

Kweichow Moutai set a fresh closing high, edging up 2 per cent to 394 yuan.

The overnight Shanghai Interbank Offered Rate (Shibor) rose to 2.6477 per cent on Tuesday, the highest in almost two years. One-month and three-month Shibor also reached the highest level since April 2015.

Yip said the rising borrowing costs would not hurt liquidity if the overall economy stays healthy.

“The current level is acceptable,” he said. “We need to watch how Shibor changes in the future, and whether China’s economic growth matches the rate increase.”