Daily Report

Hong Kong stocks rally on upbeat US market performance

Hang Seng Index gains 1.42 per cent or 298.02 points to close at 21,328.24, its highest level since May

PUBLISHED : Tuesday, 07 June, 2016, 9:14am
UPDATED : Tuesday, 07 June, 2016, 6:06pm

Hong Kong stocks rallied to their highest level since May on Tuesday, taking cues from an upbeat performance in US markets overnight which saw the S&P 500 notch up its highest close of the year.

The Hang Seng Index was up 1.42 per cent or 298.02 points to close at 21,328.24 while the Hang Seng China Enterprises Index gained 1.57 per cent or 138.95 points to 9,004.3.

Mark To, head of research at Hong Kong’s Wing Fung Financial Group, said investor sentiment towards Hong Kong stocks has improved as expectations over the pace and timing of a US Federal Reserve interest rate hike were rolled back following comments by Fed Chairwoman Janet Yellen on Monday.

Yellen signalled an upbeat outlook for the US economy and said interest rates hikes were coming but gave little sense of the timing. The Fed’s next interest-rate increase may come as late as the fourth quarter, To added.

Alex Wong Kwok-ying, asset management director with Ample Capital, also said the anticipated delay in a Fed rate hike was “positive” to Hong Kong stocks.

He said the possible southbound quota expansion was expected to boost Hong Kong stocks further. It was reported by Hong Kong’s Chinese language media that the city’s bourse may soon expand the quota for southbound trading under the Shanghai Hong Kong Stock Connect scheme.

The top five most active shares in Hong Kong all rose on Tuesday. Tencent inched up 1.61 per cent to HK$176.6, its highest intraday level since listing in Hong Kong. Ping An insurance and China Mobile jumped 1.72 per cent and 3.35 per cent respectively.

Among sectors, oil and gas companies were the biggest gainers, rising 2.06 per cent as a group, followed by insurance, which was up 1.59 per cent.

Property counters in Hong Kong also increased, up 1.08 per cent on average. Sun Hung Kai Properties jumped 2.15 per cent to HK$ 94.95 while Sino Land Company added 2.1 per cent to HK$ 12.46.

Hong Kong and China markets are closed [on Thursday] so I expect to see some selling ahead of that as investors turn more cautious
Andrew Sullivan, Haitong Securities

Market turnover of Hong Kong stocks on Tuesday reached HK$67.1 billion, the highest level achieved in five days of trading since June. Wing Fung’s To said Hong Kong stocks may face selling pressure if turnover continued to rise.

Wong said Hong Kong stocks edged up as investors bet on the expectation of a Shenzhen Hong Kong Stock Connect and MSCI’s decision on A-shares’ inclusion in its emerging markets index, but he said investors are over reacting to the two issues.

The Shanghai Composite Index added just 0.07 per cent to 2,936.04, while the CSI 300 declined 0.05 per cent to 3,177.05.

The Shenzhen Composite Index added 0.25 per cent to 1,924.88 while ChiNext dropped 0.12 per cent to 2,196.73.

“Ahead we have China trade data tomorrow [Wednesday] and then CPI and PPI on Thursday when the Hong Kong and China markets are closed, so I expect to see some selling ahead of that as investors turn more cautious,” said Andrew Sullivan, managing director of sales trading at Haitong Securities International.

The Hong Kong stock market will be closed on Thursday for a public holiday. The mainland share markets will shut for a holiday long weekend from the close of trading on Wednesday and reopen for regular trading on Monday.