Hong Kong Stock Exchange

Hong Kong stocks rally to 2016 high as risk appetite improves

PUBLISHED : Monday, 08 August, 2016, 9:24am
UPDATED : Monday, 08 August, 2016, 10:08pm

Hong Kong stocks closed Monday on a 2016 high as a better-than-expected US jobs report for July lifted investors’ risk appetite globally.

The city’s benchmark Hang Seng index rose for a third consecutive trading day and recorded its biggest daily gain in four weeks, rallying 1.57 per cent or 348.67 points to 22,494.76 on Monday.

The Hang Seng China Enterprises Index, known as the H-shares index, rose 1.59 per cent or 145.04 points to 9,276.56.

The US Labour Department reported on Friday that the US economy added 255,000 jobs in July, blowing past market expectations of 180,000.

“After a disappointing US Q2 GDP report... traders have been provided with a strong jobs report and a belief that Q3 GDP should rise 2.5 per cent,” said Chris Weston, a Melbourne-based analyst for IG Group. He added that the risk appetite “looks fairly robust” for this week.

The strong jobs data offset the impact from the weak July China trade data reported on Monday.

Chinese imports fell 5.7 per cent last month in yuan terms year on year, while exports rose 2.9 per cent, according to data released by the General Administration of Customs on Monday.

All of the main sectors rose on Monday, with IT hardware leading the gains, up 2.19 per cent on average as a group.

China’s No. 2 internet giant Tencent was the most heavily traded stock in Hong Kong. It jumped 2.28 per cent to HK$188.80, its highest level this month.

Hong Kong property developers were also among the biggest winners. Hang Lung Properties jumped 3.99 per cent to HK$17.2 while New World Development added 2.63 per cent to HK$9.36.

All the top five active shares in Hong Kong rose, with Ping An leading the gains, surging 2.32 per cent to HK$37.55. The third largest Asia-based insuranceplayer AIA Group added 0.71 per cent to HK$49.6.

The fundamentals of Hong Kong stocks did not greatly improve. 23,000 points for the Hang Seng index is a major resistance level
Wilson Tang, DBS Bank

“The rally in Hong Kong stocks is mainly liquidity driven,” said Wilson Tang, equities specialist head at DBS Bank Hong Kong. The Bank of England announced rate cut and asset purchase plan last Friday.

“However, the fundamentals of Hong Kong stocks did not greatly improve. 23,000 points for the Hang Seng index is a major resistance level,” he added.

On the Chinese mainland, the Shanghai Composite Index rose 0.93 per cent or 27.58 points to 3,004.28 on Monday. The large-cap CSI 300 gained 0.91 per cent to 3,234.18. The Shenzhen Composite Index was up 1.06 per cent or 20.66 points to 1,962.26. The startup board ChiNext Index edged 1.02 per cent or 21.54 points higher at 2130.59.

Mining industry stocks saw an average gain of 1.94 per cent on mainland markets after the nation’s top economic planner said the coal sector has seen earnings improve this year on a rebound in coal prices.

Yanzhou Coal Mining soared by the daily limit of 10 per cent to 12.76 yuan. Both Datong Coal Industry and Shanxi Coking jumped 9.93 per cent to 6.42 yuan, while Shaanxi Heimao Coking jumped 9.96 per cent to 7.84 yuan.

However, Tang said investors are still in “panic mode” when it comes to mainland shares and the market is “quite fragile”. The trading data announced on Monday shows the economy is still weak, he added.