Daily Report

Casino, auto shares propel Hong Kong stocks to highest close in 2016

Benchmark Hang Seng Index ends at 22,129.73, gaining 0.6 per cent for the session

PUBLISHED : Tuesday, 26 July, 2016, 9:10am
UPDATED : Wednesday, 27 July, 2016, 9:49am

Better than expected earnings from Macau casino operators helped propel Hong Kong stocks on Tuesday to their highest close this year, while a rally in Chinese auto makers lifted the main stock index after an investment bank raised its target prices for stocks in the sector.

The benchmark Hang Seng Index rose 0.6 per cent or 136.29 points to end at 22,129.73, its highest level since early December.

The Hang Seng China Enterprises Index, a gauge of Hong Kong-listed Chinese companies, also added 0.3 per cent or 27.49 points to 9,062.25.

Turnover increased to HK$72 billion from HK$49 billion on Monday.

“US stocks have risen for the past four weeks on strong corporate earnings. Hong Kong stocks also did quite well, ” said analysts from Bright Smart Securities in a note on Tuesday.

“Although investors turned a little cautious this week as they await the Fed’s monetary policy moves, the Hang Seng Index still has the potential to trade higher in the short term,” they added.

Although investors turned a little cautious this week as they await the Fed’s monetary policy moves, the Hang Seng still has the potential to trade higher in the short term
Bright Smart Securities analysts report

Macau casino operators led the gains.

Index component Sands China surged 6 per cent to close at HK$30.05, after the company said its revenue from mass market gambling in June recorded the first year-on-year increase in two years, despite its net income falling 39 per cent in the second quarter from the same period a year earlier.

It also said the Parisian Macau resort was scheduled to open on September 13.

Rival Galaxy Entertainment, also a Hang Seng constituent, soared 6.5 per cent to HK$26.25, marking the biggest percentage gain among blue-chips.

“Casino stocks have been underweight in the past few months. But investors now expect them to bounce back in the second half of the year,” said Victor Au, chief operating officer at Delta Asia Financial.

The stock index also saw solid gains in the auto sector.

Geely Auto jumped 5.9 per cent to HK$5.19, after the company said it agreed to sell a 50 per cent equity interest and a 40 per cent equity interest in Kandi JV and Zhidou JV, respectively, for 1.35 billion yuan to its chairman Li Shufu.

Geely said it plans to focus on the production of relatively high-end electric vehicles.

Guangzhou Auto spiked 7.1 per cent to HK$10.26, after Credit Suisse raised its target price for the stock from HK$12 to HK$13, expecting the company’s SUV GS4 to boost earnings from 2016 to 2018.

BAIC Motor climbed 4.8 per cent to HK$7.22. Credit Suisse recommended the stock in a recent research report and maintained its “outperform” rating, as it anticipated the company’s interim results to beat market expectations.

BYD tacked on 0.7 per cent to HK$51.6, after the company announced it had won a bid for new energy buses in Shenzhen worth a total of 1.5 billion yuan.

On the mainland, the Shanghai Composite Index advanced 1.1 per cent or 34.34 points to close at 3,050.17. The large-cap CSI300 gained 1.2 per cent or 38.7 points at 3,269.59. The Shenzhen Composite Index finished up 1.5 per cent or 25.15 points at 2,044.96. The startup board ChiNext Index settled 1.5 per cent or 33.67 points higher at 2,279.55.

Auto stocks, again, rose broadly, with Dongfeng Automobile advancing 1.3 per cent to 8.01 yuan, BYD rose 1.1 per cent to 61.17 yuan, and Guangzhou Auto gained 0.8 per cent to 24.14 yuan.

Brokerage firms also rallied, as Harbin Hatou Investment improved by 6.1 per cent to 12.07 yuan, and First Capital Securities swung higher by 5.5 per cent to 1.94 yuan.

With additional reporting from Celia Chen.