‘Red debut’: HSBC and Hang Seng Bank results expected to lead stocks up on first day of Year of the Dog
But concerns about inflation and US interest rate increases will lead to volatility
Hong Kong stocks could rise to make a “red debut” on Tuesday, the first trading day of the Year of the Dog, as analysts expect strong earnings results from HSBC and Hang Seng Bank.
“The Hang Seng Index saw a sharp correction in early February, which wiped off almost all the gains of January. Many blue chips are now trading at a reasonable level,” said Louis Tse Ming-kwong, managing director of VC Wealth Management.
“In addition, both HSBC and Hang Seng Bank will announce their full year 2017 results during Tuesday lunch break, which are widely expected to be good. These factors would support buying orders for the market on the first trading day of the Year of the Dog. There is a high chance for us to see a red debut,” he said.
Brokers consider a red debut as a good omen, while a black debut, where the market closes lower, is a bad omen.
Hong Kong Exchanges and Clearing will also celebrate the opening of the HKEX Connect Hall on Tuesday. The bourse operator’s former trading hall was demolished to make way for the Connect Hall, which will be used to host events and tell the history of the exchange.
HKEX chairman Chow Chung-kong and chief executive Charles Li Xiaojia will be present for a ceremony to mark the first trading day of the Year of the Dog, which is also the first time the bourse will function without a trading hall. Hong Kong Chief Executive Carrie Lam Cheng Yuet-ngor will attend the ceremony as guest of honour.
The benchmark Hang Seng Index closed at 31,115.43 on Thursday, the last trading day of the Year of the Rooster. It rose by 7,755 points, or 33 per cent, during the year, its best performance during a lunar year since the Year of the Ox in 2009.
VC Wealth Management’s Tse believes there will be a red debut on the first trading day of the Year of the Dog, but said he was not sure about the year ahead.
“The Year of the Dog is likely to be very volatile. The Hang Seng Index has risen strongly in 2017 at 36 per cent, which would be hard to repeat this year. The US employment figures and economic data is strong. This may lead to inflation worries and the US may speed up the interest rate rises process. These factors would hurt the stock market performance,” Tse said.
Gary Cheung, chairman of the Hong Kong Securities Association, said the Year of the Dog would be volatile but that he believes the outlook will remain positive as a whole.
“The US economic data is good. It would support the US market for the longer term this year and, hence, would benefit other markets, including Hong Kong. I believe the investment sentiment in the Year of the Dog is good,” he said.