China stock market

Hong Kong and mainland stocks advance as property developers and liquor distillers lead rally

Country Garden leads Hong Kong-listed developers on strong sales while Kweichow Moutai surges after raising prices of its fiery liquor

PUBLISHED : Thursday, 28 December, 2017, 1:47pm
UPDATED : Thursday, 28 December, 2017, 10:31pm

Hong Kong and mainland Chinese stocks climbed on Thursday, as property developers gained on optimism about strong sales while Kweichow Moutai raised the price of its fiery liquor.

Hong Kong’s benchmark Hang Seng Index advanced 0.9 per cent, or 266.05 points, to 29,863.71 at the close, while the Hang Seng China Enterprises Index rose 0.6 per cent. The Shanghai Composite Index also added 0.6 per cent.

Trading on both markets was light as traders remained on the sidelines in the build-up to the New Year holiday. Trading values in Hong Kong was 36 per cent below the 30-day average, while the volume on the Shanghai bourse almost matched the average level, according to data compiled by Bloomberg.

Country Garden Holdings and China Overseas Land & Investment led the rally among Chinese developers in Hong Kong, after one of the mainland’s biggest investment banks, China International Capital Corp (CICC), reported sales growth in the first and second-tier cities during the first three weeks of December.

Moutai, the distiller of a fiery liquor baijiu used in China’s state banquets, rose 8.2 per cent to 718.69 yuan, closing in on its record close of 719.11 yuan in November, after announcing that it would raise its prices by 18 per cent starting next year. The liquor, a favourite of Mao Zedong, is often seen as a symbol of conspicuous consumption among Chinese officials.

In addition to raising prices, Moutai also forecasted a 58 per cent increase in 2017 gross profit, on the back of a 50 per cent gain in sales, according to an exchange filing. The Guizhou-based distiller is aiming for a 2018 sales growth of more than 10 per cent, the statement said.

Moutai’s gains spilled over to other distillers. Jiangsu Yanghe Brewery Joint-Stock added 4.4 per cent to 118.22 yuan, while Wuliangye Yibin gained 3.8 per cent to 80.86 yuan.

The Hang Seng Index is approaching the decade high of 30,003.49 set on November 22. The benchmark has already risen 36 per cent this year, the world’s best-performing major stock market, as the strength in US equities boosts the global risk appetite while mainland investors poured funds through the links with the Shanghai and Shenzhen bourses.

“The Hong Kong market almost tracks the performance of US stocks, so as long as US stocks remain strong and keep setting new highs, the bull trend in Hong Kong will continue,” said Wang Zheng, chief investment officer at Jingxi Investment Management in Shanghai. “Home sales in China’s big cities have been pretty good recently, so we see some funds buying into the sector on bets that strong sales will continue into early next year.”

The Hong Kong market almost tracks the performance of US stocks, so as long as US stocks remain strong and keep setting new highs, the bull trend in Hong Kong will continue
Wang Zheng, Jingxi Investment Management

Country Garden surged 7.9 per cent to HK$15.28 for a record close. China Overseas Land added 1.6 per cent to HK$25.05 while China Evergrande Group jumped 4.1 per cent to HK$26.65. Sunac China Holdings climbed 2.5 per cent to HK$32.50.

High-frequency data showed home sales in China’s first- and second-tier cities continued to pick up in the first three weeks of December, and the trend was expected to carry into the first quarter of next year, said CICC analyst Zhang Yu, who recommends investors to buy Hong Kong-listed real estate stocks.

On the mainland, the Shanghai Composite gained 20.60 points to 3,296.39 at the close. The CSI 300 Index of big-cap shares rebounded 0.7 per cent.

Commodity producers also climbed after copper surged to the highest level in almost four years in London while aluminium traded close to a five-year high. Yunnan Aluminium surged 9.4 per cent to 10.35 yuan for a fifth straight day of gains and Jiangxi Copper added 6.7 per cent to 20.13 yuan.