Hong Kong, mainland stocks rise for second session, but analysts say outlook remains cloudy

Hang Seng Index added 0.56 per cent to 24,640.28 on Monday
Rally will not last as some funds still want to exit amid lofty valuations: analyst

Stocks

Daniel Renin Shanghai

Published: 10:49am, 14 Sep 2020

Why you can trust SCMP

Hong Kong and mainland stocks rose for a second trading session on Monday, bolstered by heightened expectations of economic recovery in China and a fresh capital influx. Brokers, however, said the market outlook remained cloudy because of a series of uncertainties.

The Shanghai Composite Index advanced 0.57 per cent to 3,278.81, while the Star50 index, which tracks the Nasdaq-style Star Market, rose 2.71 per cent to 1,348.07. The ChiNext Composite Index in Shenzhen rose 1.42 per cent to 2,572.60. In Hong Kong, the Hang Seng Index added 0.56 per cent to 24,640.28.

“Market sentiment has strengthened after a sharp slide last week,” said Zhao Dongmei, an analyst with Guoyuan Securities. “But it seems the rally will not last for too long, because some funds still want to exit amid lofty valuations.”

Huawen Food, which debuted on Monday, surged to the 44 per cent daily upper limit, and was trading at 7.23 yuan (US$1.06). In Hong Kong, Tencent Holdings led the gains with a 2.6 per cent jump to HK$529.5 (US$68.32).

“Investors face many uncertainties moving into the northern hemisphere autumn, most notably on the US elections and the global pandemic path,” said Stephen Innes, a strategist at AxiCorp. “Unquestionably, the virus story is the dominant macro pivot event, especially for equities, and is more likely to be dominated by optimism surrounding a vaccine. Indeed investors will be keeping their eye on the vaccine prize.”

00:49

Donald Trump again threatens to scale back US economic ties with China

China approved exchange-traded funds over the weekend, which will result in additional fund flows to its technology-heavy markets.

Its central bank also published a new regulation requiring non-financials or individuals who control two or more financial institutions with assets exceeding specified thresholds to submit applications to regulators for the establishment of financial conglomerates. David Yin, an analyst at Moody’s Investors Service, said the regulation will improve governance around the ownership of financial institutions and strengthen system-level capitalisation.

The Shanghai Composite lost 2.8 per cent last week amid concerns that an upwards momentum in stocks had run out of steam. The index rebounded 0.8 per cent on Friday, restoring investor confidence that improved economic and corporate fundamentals would continue to support a market rally.

01:39

China prepares for coronavirus vaccine mass production though clinical trials are not yet complete

Mainland China-listed companies reported their first-half earnings between July 1 and August 31. After the earnings season, institutions including mutual and hedge funds will flock to these companies with greater earnings potential over the second half of this year, analysts said.

Post