Daily Report

Hang Seng posts biggest weekly gain in 15 months

Friday trading boosted by stronger-than-expected Chinese growth in the second quarter, and upbeat US bank earnings and economic indicators

PUBLISHED : Friday, 15 July, 2016, 9:18am
UPDATED : Friday, 15 July, 2016, 6:04pm

Hong Kong’s Hang Seng Index extended its bull streak on Friday to five sessions, capping the biggest weekly gain since April 2015, after China posted stronger-than-expected growth in the second quarter and US equities marched higher into record territory overnight, on upbeat bank earnings and economic indicators.

The Hang Seng rose 0.5 per cent or 98.19 points to 21,659.25. For the week, that marked a 5.3 per cent jump, the best performance in more than a year.

The Hang Seng China Enterprises Index, or the H-shares index, added 0.4 per cent or 39.56 points to end at 9,049.66.

Earlier in the day, the National Bureau of Statistics reported that China’s gross domestic product (GDP) expanded 6.7 per cent in the second quarter, unchanged from the previous quarter’s growth and slightly above an estimated 6.6 per cent increase in a Reuters’ poll of analysts.

“China GDP for Q2 came as a positive surprise to the market, ” said Elliot Clarke, an analyst for Westpac Banking.

China GDP for Q2 came as a positive surprise to the market. There is evidence in the detail to suggest that the weaker renminbi and government support are helping to spur momentum
Elliot Clarke, an analyst for Westpac Banking

“There is evidence in the detail to suggest that the weaker renminbi and government support are helping to spur momentum.”

Also boosting the sentiment was an overnight rally on Wall Street, which propelled the S&P500 and the Dow Jones Industrial Average to new all-time highs. JP Morgan led the banking sector higher, as its quarterly results surprised many on the upside.

“The US stock market bull run boosted the Hong Kong market,” said Louis Tse Ming-kwong, director of VC Brokerage.

“The Bank of England decided not to cut interest rates on Thursday to help support the pound, which also benefited Hong Kong stocks that have strong exposure in Britain, such as HSBC and tycoon Li Ka-shing’s companies,” he added.

The BOE signalled that its monetary policy might be loosened at the August meeting.

Despite the gains in Hong Kong stocks, mainland China’s Shanghai Composite Index closed virtually flat on Friday at 3,054.30, but still up 2.2 per cent for the week. The index has risen for three consecutive weeks for a combined 7 per cent. The large-cap CSI300 was also unchanged on Friday at 3,276.28.

The Shenzhen Composite Index dropped 0.3 per cent or 6.2 points to 2,038.73, however. The startup board ChiNext Index retreated 1.3 per cent or 29.3 points to 2,263.78.

Although China’s headline growth rate appeared solid, analysts said it provided further evidence that the pressures of hitting China’s 2016 growth target is crowding out private sector investment.

“Credit continues to flood into China’s economy with further growth in China’s M0 and M1 money supply measures. But the bulk of that is only being accessed by the less-productive and deeply over-capacity state sector,” said Angus Nicholson, an analyst for IG Group.

“In the short-term, today’s release underscores the near-term demand for commodities, but continues to show that China is doing little to right its major structural issues,” he said.

Among the market shakers, electric vehicle manufacturer BYD surged 5.2 per cent to HK$51.25, after media reports said Samsung Electronics plans to invest in the company.

Rival Chinese auto makers also saw fund inflows, as Dongfeng Motor climbed 2.1 per cent to HK$8.31, Great Wall Motor advanced 1 per cent to HK$6.91.

Over on the mainland, banking stocks mostly rose, with China Everbright Bank gaining 1.9 per cent to 3.82 yuan, and China Construction Bank up 1.6 per cent to 5.09 yuan.