Hong Kong shares gain from dovish Fed tone on interest rates

Risk-averse sentiment continues, boosting mining stocks, but turnover remains low

PUBLISHED : Thursday, 07 July, 2016, 9:24am
UPDATED : Thursday, 07 July, 2016, 10:41pm

Hong Kong stocks edged higher on Thursday as the mood was bolstered by the dovish tone of the minutes from the Federal Reserve’s June meeting, which suggested the odds of a rate hike are diminishing.

Risk-averse sentiment was strong as gold-related stocks climbed to one-year highs while market turnover remained at a low level.

“Ups and downs will continue short term without specific direction,” said Ben Kwong Man-bun, executive director of KGI Asia.

“A plunge in the pound has triggered fears on Brexit, while news on a suspended rate hike in the US will benefit some local stocks.”

The Hang Seng Index rose 1.03 per cent or 211.63 points to 20706.92. The Hang Seng China Enterprises Index also rose 1.15 per cent or 97.85 points to 8600.99.

Daily turnover dropped 18 per cent to HK$49.7 billion, the lowest in more than a month.

Miners, metals and automobile stocks rallied, while the software sector took a tumble.

Zijin Mining Group shares surged 4.27 per cent to HK$2.93, the highest level since June 2015.

Hengxing Gold soared to its highest level since listing in 2014, rising 24.45 per cent to HK$2.85.

The spot gold price continued to pick up, at one stage touching US$1,363.36 per ounce, the highest since March 2014.

Ups and downs will continue short term without specific direction
Ben Kwong Man-bun, executive director of KGI Asia

According to the minutes of the Fed’s policy meeting on June 16-17, ahead of the UK referendum, policymakers had decided that interest rate hikes should stay on hold until they had a handle on the consequences of Britain’s vote on EU membership, Reuters reported.

Interest-rate sensitive Hong Kong property developers surged.

Henderson Land Development Company rose 2.09 per cent to HK$44.0 while New World Development Company gained 1.67 per cent to HK$7.91.

China Shenhua Energy Company outperformed the blue-chip peers to close 3.67 per cent higher at HK$14.14. PetroChina shares surged 2.33 per cent to HK$5.26 and Sinopec Corp shares gained 1.86 per cent to HK$5.49, as oil prices in New York and London both surged 1.8 per cent overnight.

Kwong said investors should watch for any further changes in the pound and yen, which currently reflect market sentiment.

The pound hovered around US$1.28 to US$1.29 on Thursday, after it broke the US$1.3 level and touched a new 31-year low on Wednesday.

Analysts expect the currency to drop further amid the ongoing fallout of the Brexit factor. The yen strengthened 0.31 per cent to 101.01 per dollar as of 4.27pm.

In the mainland, the Shanghai Composite Index inched down 0.01 per cent or 0.45 points to 3,016.85. The large-cap CSI300 shed 0.21 per cent or 6.85 points to 3,209.95. The Shenzhen Composite Index maintained flat at 2,015.15. And the startup board ChiNext Index dipped 0.34 per cent or 7.64 points to 2,233.92.

Trading turnover maintained at 733.5 billion yuan (HK$851.7 billion).

The mining and metal sectors increased,while property, securities and insurance fell.

Zhongjin Gold Corp shares surged 9.9 per cent to the daily trading limit and ended at 14.64 yuan.

China Vanke’s A-shares in Shenzhen dropped 4.96 per cent to 18.82 yuan, while trading turnover eased back to 8.1 billion yuan, after it soared to a historic high of 20 billion yuan on Wednesday when its hostile shareholder Baoneng Group increased holding again.

Additional reporting by Laura He.