Hong Kong stocks climb most in week on Fed interest rate and trade talk hopes
- Property developers post best performance among industry groups on expectations the Fed will soften the pace of interest rate hikes
Hong Kong stocks rose the most in a week on expectations the Federal Reserve will soften the pace of interest rate hikes and as traders watch for signs of progress between China and US in resolving their trade dispute in the G20 summit later this week.
The Hang Seng Index climbed 1.7 per cent on Monday, its biggest gain since November 15. China’s benchmark Shanghai Composite Index fell for a third day as the exchange took measures to crack down on excessive issuance of dividend stocks as part of the widened campaign to rein in manipulation.
New World Development and other property develops led the gains in Hong Kong, as the sector is among the most sensitive to the changes in interest rates.
Traders took clues from futures contracts on major US stocks gauges, which rose in Asian trading hours. Federal Reserve Chairman Jerome Powell is expected to speak on Wednesday after earlier acknowledging that the US economy may face headwinds next year. JPMorgan Asset Management says some progress on a trade deal could be expected from the meeting between President Xi Jinping and US President Donald Trump on Friday, as a protracted trade war risks derailing growth of both nations.
“The pace of US interest rate increases may probably slow down because of the changing expectations about the economic outlook and the stocks slump there,” said Wei Wei, a trader at Huaxi Securities in Shanghai. “The trade talk between Xi and Trump is something that’s hard to predict. But from the perspective from investors, they hope a deal to be struck.”
The Hang Seng Index added 448.50 points to 26,376.18. The Hang Seng China Enterprises Index, or the H-share gauge, gained 1.3 per cent.
A measure of property stocks surged 2 per cent for the biggest gain among all industry groups. New World Development climbed 3.7 per cent to HK$10.64 and Sino Land advanced 3.3 per cent to HK$13.20. Henderson Land Development jumped 2.9 per cent to HK$39.45.
Tongcheng-Elong, the online Chinese travel agency backed by Tencent Holdings and Ctrip.com International, rallied 27 per cent from its initial public offering price to HK$12.40 in debut trade.
Air China rose 1.3 per cent to HK$7.55 and China Eastern Airlines added 1.9 per cent to HK$4.94 on optimism falling crude oil prices will reduce their operating costs. Futures contracts on crude oil traded near US$51 a barrel, close to the lowest level in more than a year, on concern about a glut of supply.
The Shanghai Composite dropped 0.1 per cent, or 3.67 points, to 2,575.81 on Monday. The index extended a 2.5 per cent slump on Friday that was triggered by profit taking on small-caps and a report from The Wall Street Journal that the US was calling on its major allies including Japan and Germany to shun the products by Chinese telecom equipment juggernaut Huawei Technologies because of security concerns.
Smaller companies with the potential of dividend stocks payouts took a pounding, with Beijing Hanbang Technology and Zhejiang Zhengyuan Zhihui Technology both tumbling by the 10 per cent daily limit.
Publicly traded companies with year-on-year profit declines exceeding 50 per cent and per-share earnings lower than 0.2 yuan (2.9 US cents) are allowed to issue no more than five such stocks for every 10 held, according to the Shanghai and Shenzhen exchanges, effective immediately.