Hang Seng Index hits two-year high after US Fed sets more gradual tone for rate increases

Hong Kong shares extended their gains on Thursday, led by Chinese financials after the US Federal Reserve Chair Janet Yellen signalled a gradual increase in interest rates, spurring an overnight rally in US stocks and Treasuries. Mainland China equities also gained after robust trade data for June.

The Hang Seng Index rose 302.53 points or by 1.16 per cent, to a two-year high of 26,346.17 while the Hang Seng China Enterprises Index advanced 160.07 points, or 1.5 per cent, to 10,677.44. Market turnover reached HK$96.205 billion.

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 fears that the PBOC would step up mid-year loan checks and tighten monetary policy.

Chinese banks and insurers led the gains, with Ping An adding 1.35 per cent to HK$56.2, while China Life advanced 1.6 per cent to HK$25.1.

Bank of China gained 1.3 per cent to HK$3.8, Industrial & Commercial Bank of China increased 1.34 per cent to HK$5.26 and Agricultural Bank of China added 1.11 per cent to HK$3.63.

“Strong gains seen in Chinese financials are pulling up the rest of Hong Kong’s stock market,” said Kingston Lin King-ham, director of securities brokerage AMTD. “The next target in the Hang Seng Index may be 26,500 for the quarter.”