Hong Kong stocks close above 26,000 level as PBOC eases liquidity fears

Chinese financials lead the gains after PBOC injects short-term liquidity into markets, easing concerns about overly tight monetary policy

PUBLISHED : Wednesday, 12 July, 2017, 9:16am
UPDATED : Wednesday, 12 July, 2017, 10:58pm

Hong Kong stocks touched a two-year high on Wednesday, led by Chinese financials including Bank of China and Industrial & Commercial Bank of China after the People’s Bank of China injected short-term liquidity into the markets, easing concerns about an overly tight monetary policy bias.

The Hang Seng Index closed 0.6 per cent, or 166 points higher, at 26,043.6, the highest close since July 3, 2015. The Hang Seng China Enterprises index gained 1.0 per cent, or 101.2 points, to 10,517.4 at the close.

China’s central bank conducted short-term liquidity injections this week via reverse repurchase agreements as it resumed its open market operations after suspending them for more than a week, which eased earlier market fears that the PBOC would step up mid-year loan checks and tighten monetary policy.

Bank of China added 2.5 per cent to HK$3.8 while ICBC climbed 3.4 per cent to HK$5.2 at the close. Agricultural Bank of China rose 2.3 per cent to HK$3.6. Morgan Stanley lifted 2017 earnings forecasts for a string of Chinese banks, and adjusted its H-share target prices upward by 5 per cent on average largely due to wider net interest margin assumptions.

We have different value judgements for selecting stocks compared to mainland investors
Alex Wong Kwok-ying, Ample Finance Group

Although the surge in Sunac China on Tuesday on the back of its acquisition deal with Wanda has drawn massive southbound traffic from investors in Shanghai and Shenzhen, some Hong Kong brokers remain cautious.

“We have different value judgements for selecting stocks compared to mainland investors,” said Alex Wong Kwok-ying, director at Ample Finance Group. “What they think to be great investment opportunities we sometimes would not agree with.”

China adds fewer new stock investors on weakness in small caps, curbs

He said it was difficult to predict the possible price movement of Sunac China, but forecast that Hong Kong shares will do well as the local market continues to be led by gains in financial stocks.

Sunac China shed 0.1 per cent to HK$16.8 on Wednesday, after it surged more than 13 per cent to HK$ 16.82 on Tuesday.

Meanwhile Ping An Insurance lost its earlier gains to close 0.5 per cent lower to HK$54.9.

Tencent saw the biggest turnover, rising 1.0 per cent, or 2.8 points, to HK$281.2.

HSBC slipped 0.5 per cent to HK$74.7, as all three technical indicators – 14-day RSI, MACD and Williams %R – showed overbought levels.

On the mainland, the CSI 300 — which tracks the large companies listed in Shanghai and Shenzhen — lost 0.3 per cent, or 12 points, to 3,658.8 but the Shanghai Composite Index eased 0.2 per cent, or 5.5 points, to 3,197.5.

The Shenzhen Composite Index lost 0.1 per cent, or 2.2 points, to 1,889.4 and the Nasdaq style ChiNext recovered earlier losses to close 0.2 per cent, or 2.8 points higher, to 1,786.8.

This week’s National Financial Work Conference is expected to set the course for the development of financial reforms in China, with debates focusing on the scrutiny of off-balance sheet activities by financial companies, Mark McFarland, chief economist Asia at Union Bancaire Privée, wrote in a research note.

Asian trading was also muted on Wednesday, with Tokyo’s Nikkei 225 shedding 0.5 per cent to 20,098, and the South Korea Kospi edging down by 0.2 per cent to 2,391.8.