Hong Kong stocks edge higher after Trump speech light on detail

Macau casino operators led the Hong Kong market higher as gambling revenues rose for a seventh month and hit a two-year high in February

PUBLISHED : Wednesday, 01 March, 2017, 9:15am
UPDATED : Wednesday, 01 March, 2017, 10:36pm

Hong Kong stocks nudged higher amid volatile trading on the first day in March after US President Donald Trump’s first speech to Congress failed to provide solid details on policy.

Trump emphasised his tax reform and infrastructure policies but produced little in the way of fresh ideas.

He called for an end to trivial fights, adopting an uncharacteristicly soft tone in the speech. With little to go on, markets and investors shifted their focus to the increasing likelihood of an interest rate rise in March as comments from US officials become more hawkish. The potential for a rise put downside pressure to Hong Kong stocks, but those worries were partly offset by China’s better-than-expected manufacturing data for February.

The Hang Seng Index rebounded from a four-day losing streak to close Wednesday at 23,776.5, up just 0.2 per cent. The Hang Seng China Enterprises Index was slightly down, by 0.1 per cent, to close at 10,288.

The turnover in Hong Kong also gained modestly, compared with the previous two sessions, climbing 4 per cent to HK$76.2 billion on Wednesday.

Macau casino operators led the Hong Kong market as gambling revenues rose for a seventh month and hit a two-year high in February. In the month, Macau generated a revenue of 23 billion patacas (US$2.9 billion), up 17.9 per cent from 19.5 billion patacas a year earlier, and the highest since January 2015, Macau government data showed on Wednesday.

Galaxy Entertainment was the biggest gainer among HSI 50 components, up 5.5 per cent to close at HK$39.3 after it posted a 51 per cent rise in 2016 net profit on Tuesday. Sands China followed, advancing 3.9 per cent to close at HK$33.7.

Hong Kong property developers also outperformed, with Wharf Holdings and Sun Hung Kai Properties up 2.0 per cent and 1.9 per cent, respectively.

Shares of Yingde Gases Group closed 16.9 per cent higher at HK$6.2 after buyout fund PAG Asia Capital offered to at least match the top-end of the indicative non-binding offer by Yingde’s United States-based rival Air Products, setting the stage for a possible bidding war.

However, oil companies underperformed on Wednesday. China’s state giants PetroChina and CNOOC dropped 1.4 per cent and 1.0 per cent separately.

China Hongqiao Group, the world’s largest aluminium smelter, saw shares tumble 8.3 per cent to HK$7.15 before trading was suspended after it was attacked by short-selling institution Emerson Analytics.

The short seller said in a report that the Hongqiao has been hiding costs, and suggested a target price of only HK$3.1.

“The overall sentiment turned more cautious as the Hang Seng has continued to slide in the past four days while US stocks also ended the rising trend,” said Linus Yip Sheung-chi, First Shanghai Securities’ chief strategist after he heard “nothing new” in Trump’s speech.

Three Fed officials stole Trump’s thunder and drew investors’ attention as they made hawkish comments on an interest rise overnight. New York Federal president William Dudley said a rise was in the “relatively near future” in an interview with CNN International, before Trump started his speech.

Now traders are awaiting Federal Reserve Chair Janet Yellen’s speech on Friday, which could offer more clues on a timetable of possible rate rises.

“The concern about an interest rise in March in the US was partly offset by the news of China’s PMI,” added Yip.

China’s official manufacturing Purchasing Managers Index for February came in at 51.6, beating analysts expectation of 51.2. The PMI for January was 51.3.

The private Caixin manufacturing PMI, which focuses more on small- and medium-sized enterprises, was 51.7, also beating market expectations of 50.8. That compared with 51 in January. A PMI of more than 50 indicates expansion in an industry.

“Stronger external demand appears to have played a key role in the pick-up, with the new export orders component of both PMIs rising to multi-year highs. The upshot is that today’s PMIs suggest that growth remains reasonably strong by recent standards,” said Julian Evans-Pritchard, China Economist at Capital Economics. “But this largely comes on the back of stronger external demand which we don’t think will be sustained.”

Yip expects the city’s benchmark to “hover around 23,700 to 23,800 for the moment”. However Benny Mau Ying-yuen, the chairman of Hong Kong Securities Association said Hong Kong stocks could rise to the level of 26,000 points during 2017, with turnover averaging between HK$60 billion and HK$70 billion.

The mainland markets also reacted positively to the PMI data. The Shanghai Composite Index gained 0.2 per cent to close at 3,246.9, while the CSI 300 Index rose 0.2 per cent to 3,458.4.

The Shenzhen Component Index gained 0.3 per cent to 10,418.6, and the Nasdaq-like ChiNext went up 0.3 per cent to 1,932.

SF Express, China’s biggest delivery service provider, narrowed its gains to close 4.8 per cent higher at 70 yuan after mainland reports consecutive daily rallies in the stock had attracted the attention of the authorities.

The company’s share price reached its daily limit for five straight days after it completed its back-door listing on Friday after buying Shenzhen-listed Maanshan Dingtai Rare Earth & New Material Co.