China stock market

Hong Kong and China stocks end higher on US-China trade detente hope, interest rate outlook

  • The HSI gains 1.3 per cent and the Shanghai Composite is up 1.1 per cent
PUBLISHED : Wednesday, 28 November, 2018, 5:16pm
UPDATED : Wednesday, 28 November, 2018, 10:15pm

Hong Kong and China’s stocks both advanced on Wednesday, as traders bank on the chance of a US-China trade detente from the G20 meeting and a pause in raising borrowing costs by the Federal Reserve.

The Hang Seng Index rose 1.3 per cent and the Shanghai Composite Index added 1.1 per cent for the first gain in five days. Tencent Holdings gained the most in almost two weeks in Hong Kong, while telecom and consumer companies led the pack of gainers in the mainland.

US President Donald Trump was hopeful of a breakthrough with his Chinese counterpart Xi Jinping over dinner on Saturday evening in Buenos Aires, Larry Kudlow, Trump’s top economic adviser, told reporters on Tuesday during a briefing before the Group of 20 meeting. But the US was also ready to impose more tariffs on Chinese imports if the upcoming talks fall apart, he said.

Traders’ attention was also gripped by comments by vice-chairman of the Fed Richard Clarida before chairman Jerome Powell’s speech on Wednesday. At the end of an address to a conference in New York, Clarida said he supported “gradual policy normalisation”.

“The risk appetite is rising a bit as there are signs that both China and the US want to strike a deal to ease the current trade dispute,” said Wang Chen, a partner with Xufunds Investment Management in Shanghai.

“The market now expects a pause in interest rate increases in the US early next year.”

The Hang Seng Index gained 350.60 points to 26,682.56, while the Hang Seng China Enterprises Index added 1.1 per cent. The Shanghai Composite index climbed 27.06 points to 2,601.74, snapping a four-day, 2.9 per cent loss.

Tencent, the most valuable stock on the Hang Seng Index, rallied 3.6 per cent to HK$314.80, contributing to a quarter of the gain on the benchmark. Casino operators also gained. Sands China climbed 3 per cent to HK$34.35 and Galaxy Entertainment Group added 2.6 per cent to HK$50.50.

In the mainland, measures tracking consumer and telecom stocks added at least 1.5 per cent, the best performers among the industry groups. Among them, Jiangsu Yanghe Brewery Joint-Stock gained 3.7 per cent to 96.91 yuan and Foshan Haitian Flavouring & Food advanced 2.8 per cent to 63.27 yuan. Dr Peng Telecom & Media Group jumped 6 per cent to 8.55 yuan.

Xinjiang Communications Construction Group surged 44 per cent to 10.34 yuan in its debut in Shenzhen, the maximum daily gain for mainland-traded initial public offering shares.

Its valuation gap with the industry’s average and main rival would suggest the stock has room to rise, and investors also bet that the company will benefit from China’s massive infrastructure construction in the western region and from projects under the Belt and Road Initiative.

Xinjiang Communications is now valued at 24.6 times earnings, compared with the average multiple of 37.4 times for the industry average, according to Bloomberg data. Xinjiang Beixin Road & Bridge Group, its main rival in the region, currently trades at 103 times earnings, the data showed.