Shenzhen stock link hopes drive Hong Kong shares to year high

Hang Seng ends up 0.39 per cent at 22,580.55. Brokerages lead the risers, but oil and gas stocks have a bad day, on the back of declining oil prices

PUBLISHED : Thursday, 11 August, 2016, 9:27am
UPDATED : Thursday, 11 August, 2016, 10:20pm

Hong Kong stocks climbed to a new high for the year on Thursday, as speculation on the launch of the Hong Kong–Shenzhen Stock Connect drove an overall rally of brokerages.

The Hang Seng Index ended up 0.39 per cent or 88.12 points to 22,580.55, while The Hang Seng China Enterprises Index, or the H-shares index, advanced 1.16 per cent or 107.84 points to 9,423.34.

“The rising in Hong Kong stocks came mainly because investors take the Shenzhen link as an excuse to bet on related shares,” said Hanna Li Wai-han, a strategist at UOB Kay Hian (Hong Kong).

“But I do not expect the link can greatly boost local shares when it launches later. Investors are just fueling speculation.”

The start date for the link is still to be announced, but mainland media reports suggest China’s top securities regulator has already set up a special work group to launch the new Stock Connect programme, which will allow investors in the two cities to directly buy stocks on each other’s market.

Hong Kong Exchanges and Clearing chief executive Charles Li told CNBC in an interview, that the link with Shenzhen is “imminent”, further fueling anticipation.

The brokerage sector was Thursday’s biggest gainer, with all major firms recording share price rises.

First Shanghai Investments recorded its biggest gain in a year, spiking 11.11 per cent to HK$1.4. Guotai Junan International surged 8.33 per cent to HK$2.99, and Shenwan Hongyuan jumped 8.14 per cent to HK$4.25. Haitong International Securities increased 7.85 per cent to HK$5.22.

The insurance and bank sectors also jumped, up 1.2 per cent and 1.01 per cent, respectively, on average. The most heavily traded shares were China Construction Bank, which surged 2.17 per cent to HK$ 5.66, and Industrial & Commercial Bank of China, the largest bank in the world by assets, which added 2.16 per cent to HK$ 4.74.

The rising momentum for Hong Kong stocks remains and the city’s benchmark is highly possible to reach 23,000 point in coming weeks
Hanna Li Wai-han, a strategist at UOB Kay Hian (Hong Kong)

Hong Kong Exchanges & Clearing, the city’s sole bourse operator, gained 2.92 per cent to HK$197.70, with the market turnover in Hong Kong surging to a monthly high at HK$75.79 billion.

“The rising momentum for Hong Kong stocks remains and the city’s benchmark is highly possible to reach 23,000 point in coming weeks,” said Li.

“However, there are some potential risks causing Hong Kong stocks’ retreat including the possible earning drop of Chinese companies and uncertainties in US election.”

Energy shares lost ground on Thursday, however, on the back of declining oil prices.

Kunlun Energy lost 0.17 per cent to HK$5.92. Cnooc dropped 0.43 per cent to HK$9.32. PetroChina also fell 0.75 per cent to HK$5.27.

Mining and coal sectors also declined, down 1.33 per cent and 0.3 per cent, respectively, on average as a group.

A slew of corporate heavyweight earnings reports was also closely watched by investors.

Telecoms giant China Mobile reported its net profit increased 5.6 per cent to 60.6 billion yuan, better than market expectations. CK Hutchison closed 0.75 per cent lower to HK$93.25, but it posted a better-than-expected profit in the first half.

Shares in Chinese sportswear maker Li Ning and chipmaker SMIC jumped 6.3 per cent and 5.71 per cent respectively, after reporting better-than-expected results.

In the mainland, the Shanghai Composite Index nudged lower by 0.53 per cent to 3,002.64. The large-cap CSI300 dropped 0.31 per cent to 3,233.36. However, the Shenzhen Composite Index dropped 1.28 per cent to 1950.92. The ChiNext Index, the Nasdaq-style startup board, lost 1.57 per cent to 2,103.40.