Update | Hong Kong, mainland stocks rally as removal of presidential two-term limit boosts confidence in China
Hong Kong and Chinese stocks rallied on Monday amid optimism over earnings for Chinese companies and increased confidence in long-term stability after Beijing scrapped the constitutional limits on the number of terms the president and vice-president can serve.
The proposal by the Communist Party’s Central Committee, which was reported by the Xinhua News Agency on Sunday, is being widely interpreted as paving the way for President Xi Jinping to stay on beyond his current term.
The Hang Seng Index rose 0.74 per cent, or 231.43 points, to 31,498.60 on Monday, with turnover expanding to HK$123.73 billion (US$15.8 billion) from Friday’s HK$103.33 billion. The Hang Seng China Enterprises Index, known as the H-share gauge, rose 0.78 per cent, or 99 points, to 12,834.06.
“China’s implementation of supply-side reforms has been very successful. The market is in a very healthy state after cutting industrial overcapacity and property inventory,” said Mandy Chan Suk-man, head of China and Hong Kong equities at HSBC Global Asset Management.
Hong Kong Exchanges and Clearing, the bourse operator, was the bigger contributor, adding 37 points to the benchmark index. It rose 3.50 per cent to HK$295.80.
Other financial companies also gained. China Construction Bank added 0.36 per cent to HK$8.47, Bank of East Asia climbed 3.06 per cent to HK$35.40. Ping An Insurance Group increased 1.46 per cent to HK$87.
Geely Automobile Holdings was the best performing blue chip, surging 6.49 per cent to HK$25.45. Chairman Li Shufu, who bought a 9.7 per cent stake in Daimler through an affiliate, has become the single largest investor in the parent of Mercedes-Benz, according to a statement over the weekend.
Great Wall Motor advanced 4.61 per cent to HK$9.30. The company and BMW signed a letter of intent to set up a joint venture that will make electric Mini cars in China, according to company statements.
The mainland’s Shanghai Composite Index gained 1.23 per cent, or 40.55 points, to 3,329.57 and the CSI 300 Index of the mainland’s big-cap stocks advanced 1.16 per cent, or 47.33 points to 4,118.42. It was a sixth straight day of rises for both indices.
The ChiNext gauge of smaller companies surged 3.6 per cent, its biggest gain since July. Lens Technology, which has the second-biggest weighting on the board, rallied 7.17 per cent to 26.89 yuan and BGI Genomics, the third largest, climbed by its daily limit of 10 per cent to 166.89 yuan.
Smaller companies paced the gains among mainland equities on expectations supply of initial public offerings, most of which are small-caps, will slow after the China Securities Regulatory Commission proposed extending the deadline for implementing a registration system for IPO sales by another two years to February 2020.
The Hang Seng Index has recovered about half of its loss since the end of January, while the Shanghai Composite has recouped 40 per cent of its decline.
“The Hong Kong and mainland markets are now consolidating to seek the bottoms as the impact from overseas seems to be abating now,” said Wu Kan, a fund manager at Shanshan Finance in Shanghai.
