Stocks in Hong Kong, mainland advance as Bond Connect opens for business

PUBLISHED : Monday, 03 July, 2017, 9:21am
UPDATED : Monday, 03 July, 2017, 12:28pm

Shares in Hong Kong and mainland China climbed in Monday’s morning session as global investors began buying China’s bonds through the new Bond Connect programme.

But concerns remained over global political uncertainties and a further decline in technology shares.

The Hang Seng Index gained 24.36 points, or by 0.09 per cent, to 25,788, while the Hang Seng China Enterprises Index increased 37.21, or by 0.36 per cent, to 10,402. In mainland exchanges, the CSI 300 Index dropped 13.37, or 0.37 per cent, to 3,653.43, while gains were recorded on both the Shanghai and Shenzhen bourses.

There’s too much uncertainty in the US right now and tech stocks will drop from these levels and pull the rest of the market with them
Brett McGonegal, Capital Link Investment

“I think the global markets are in for a breather near term. There’s too much uncertainty in the US right now and tech stocks will drop from these levels and pull the rest of the market with them,” said Brett McGonegal, the chairman and chief executive of Capital Link Investment Holdings. “This will be negative near term for all markets but will offer a geographic shift in equity allocation away from the US into china.”

The Bond Connect programme, which allows Hong Kong investors to trade in China’s fixed income markets, kicked off this morning with more than 3 billion yuan worth of mainland Chinese debt purchased by international investors at the start of trade.

“The Bond Connect is an extremely important event as it shows the regulators are continuing to deliver on their promises and open up the Chinese market,” said McGonegal. “This will be looked back on as a day that helped take China to the next level and begin to build the debt market mechanism that will increase liquidity and push the renminbi’s globalisation further on the way to its objective of becoming a base currency.”

HSBC and an asset management unit of Bank of China said they have completed their first trades using the scheme. HSBC gained 1.7 per cent to HK$73.90 in the morning session while most bank shares retreated after gains in previous sessions.

Chinese online major Tencent lost 0.07 per cent to HK$279.00, following last week’s decline in technology shares.

Chinese manufacturing was stronger than forecast last month, according to a key index released on Monday morning.

The China Caxin manufacturing PMI for June stood at 50.4, better than the 49.8 estimated by economists and the 49.6 a month earlier. The official manufacturing PMI, announced on Friday, also recorded a better than expected performance.

“China is poised to rally later this summer as people start to grasp the power of the economy, coupled with the Party congress in October. This will be too powerful to ignore and many will be forced to chase. [President] Xi will fortify power and this will swing sentiment and drive Chinese stocks higher,” said McGonegal.

All three major US indices logged strong gains in the first half of the year, with the Dow Jones rising 8 per cent, the S&P 500 up 8.2 per cent and the Nasdaq soaring 14 per cent, its best six-month performance since 2009. The rally in Wall street was partly due to the rebound in oil and bank stocks and a strong performance in the large-cap technology stocks despite a recent downturn.

US markets will close early on Monday and remain closed on Tuesday for the July 4 Independence Day holiday. Other global markets will operate a normal schedule, though trading volumes are expected to be lower.

In Asian trading on Monday morning, Japan’s Nikkei 225 gained 0.13 per cent and South Korea’s Kospi lost 0.08 per cent.