HK stocks extend world-beating rally to end at 8-month high

Hang Seng Index closes at 22,766.91, up 0.83pc. Shanghai Composite Index jumps 1.6pc to 3,050.67. Markets shrug off weaker-than-expected Chinese economic data

PUBLISHED : Friday, 12 August, 2016, 9:18am
UPDATED : Friday, 12 August, 2016, 9:59pm

Hong Kong stocks rose for a third consecutive day on Friday, extending a world-beating rally to end at an eight-month high, after some of the bourse’s flagship companies reported strong profitability earlier in the week and the markets shrugged off weaker-than-expected Chinese economic data.

The Hang Seng Index closed at 22,766.91, up 0.83 per cent or 186.36 points. The Hang Seng China Enterprises Index, or the H-shares index, climbed 1.4 per cent or 131.51 points to 9,554.85.

Hong Hao, chief China strategist at Bocom International in Hong Kong said the local market boost following an overnight US rally, driven by the country’s better-than-expected economic growth.

“Technological innovation in the country is powerful,” said Hong. “And that critical role in boosting the US economy cannot be ignored.”

Wang Chong, an analyst for Victory Securities agreed, adding that “overseas market sentiment was very bullish, with all three major US indexes closing at record levels for the first time in 17 years, along with a surge in oil futures.

“They all helped boost Hong Kong stocks,” he said.

Oil prices rallied to their highest close in three weeks meaning the Hong Kong energy sector was among the biggest gainers.

Chinese offshore producer Cnooc led the blue chips, ending up 3.22 per cent to HK$9.62. Refining giant Sinopec gained 1.1 per cent to HK$5.59, state-owned energy firm PetroChina rose 1.3 per cent to HK$5.34.

“Moreover, the Shenzhen-Hong Kong Stock Connect scheme may be coming soon, and that’s also bolstering sentiment,” Wang added.

Brokerage firms, the direct beneficiaries of the Shenzhen link, also extended their gains on Friday.

Haitong Securities added 1.32 per cent to HK$13.78. Guotai Junan International jumped 1.67 per cent to HK$3.04. Citic Securities rose 1.24 per cent to HK$17.96 , adding to a 4.5 per cent advance on Thursday.

The market was further fueled by index heavyweights reporting better-than-expected earnings earlier in the week.

CK Hutchison Holdings climbed 2.68 per cent to HK$95.75 after its net gain beat estimates, up 2 per cent in the first half. China Mobile increased 2.38 per cent for a second day after its half-yearly earnings exceeded forecasts.

The mainland’s best-known sportswear brand Li Ning surged 7.74 per cent after it announced a dramatic turnaround in fortune on Thursday.

While the mainland’s largest contract chipmaker SMIC jumped 5.41 per cent after it reported the company’s strongest quarterly result to date in the three months to June.

Turnover in Hong Kong continued to rise on Friday, standing at the highest level, HK$79.06 billion, in seven weeks as investors shrugged off weak Chinese economic data.

Earlier on Friday, the National Bureau of Statistics reported China’s July retail sales and industrial production increased 10.2 per cent and 6 per cent respectively from a year earlier, slightly below market expectations. Fixed asset investment also missed forecasts, growing 8.1 per cent year-on-year for the first seven months of the year.

“The weak data failed to drag down the stock market, as the figures were not out of market expectations or a new story,” said Hong.

“The biggest potential risks for Hong Kong stocks are a US interest rate hike and possible political turbulence.”

In the mainland, the Shanghai Composite Index jumped by 1.6 per cent to 3,050.67 and the large-cap CSI300 surged 1.88 per cent to 3,294.23. The Shenzhen Composite Index rallied 1.17 per cent to 1,973.67, while the ChiNext Index, the Nasdaq-style startup board, added 0.97 per cent to 2,123.84.

Vanke, China’s biggest residential developer by sales, surged by the 10 per cent daily limit to 22.78 yuan in Shenzhen.