Daily Report

HK shares edge higher ahead of Yellen speech on US interest rates

Hang Seng rises 0.41 per cent to finish at 22,909.54. China Life shares jump 3.4pc after Deutsche Bank raises price target

PUBLISHED : Friday, 26 August, 2016, 10:28am
UPDATED : Friday, 26 August, 2016, 9:38pm

Hong Kong stocks fluctuated throughout the day, before closing slightly higher on Friday, as investors remained cautious ahead of a speech later this evening by Federal Reserve chair Janet Yellen on the outlook for US interest rates.

The Hang Seng Index rose 0.41 per cent or 94.59 points to finish at 22,909.54. The Hang Seng China Enterprises index gained 0.48 per cent or 45.26 points to 9,550.04.

Leading the gainers were watch and jewellery companies, which on average jumped 2.76 per cent. Semiconductors climbed 2.08 per cent. Conglomerates rose 1.83 per cent.

However, market turnover on Friday was the lowest in three weeks, dropping to HK$54.77 billion.

Banking and insurance sectors were also among the gainers, with China Life Insurance jumping 3.4 per cent to close at HK$19.08 after Deutsche Bank upgraded its target price to HK$31.4.

That came after the nation’s largest insurer said on Thursday night that its first-half net profit fell 67 per cent, due to investment losses.

Bank of Communications rose 0.52 per cent to close at HK$5.76 after it reported a 0.9 per cent gain in net profit, which amounted to 37.66 billion yuan late on Thursday.

China Construction Bank, however, dropped 0.86 per cent to close at HK$5.77 after it reported a 1.15 per cent profit growth of 133.41 billion yuan.

Before Friday, Hong Kong stocks had fallen for two days in a row, as investors worried about soft corporate earnings and the possibility of an early US rate increase.

Joseph Tong, chairman of Morton Securities said the weakness was due to profit-taking by investors and said the Hong Kong and mainland stock markets would remain choppy for a while.

“Both Hong Kong and mainland stock markets have traded solidly higher this month due to the announcement of the Shenzhen-Hong Kong Stock Connect. After that announcement, it was natural to see some profit taking,” Tong said.

“[However], this type of profit taking is over now. The market is on an uptrend again, as we may have a clearer picture about the direction of US interest rates after Yellen’s speech,” he added.

Yellen is scheduled to speak at 11am US eastern time, 11pm Hong Kong time, at the Jackson Hole Symposium in the US. Most expect her to give a hint on whether the Fed will increase interest rates at its September meeting.

Tong expects at least one rise this year, either in October or in December.

Dickie Wong, executive director of research at Kingston Securities said he does not expect an interest hike will be announced tonight.

“Hong Kong stocks will rebound slightly and remain stable short-term in the coming week, and I do not think there will be any rate hike until the end of year,”said Wong. “In the second half, I cannot see strong rising momentum.”

In the mainland, the Shanghai Composite Index rose 0.06 per cent to 3,070.31. The CSI 300, which tracks the large caps listed in Shanghai and Shenzhen, moved down 0.06 per cent to 3,307.09.

The Shenzhen Composite Index gained 0.20 per cent to 2,023.09. The Shenzhen Component Index improved by 0.14 per cent to 10,693.75. The Nasdaq-style ChiNext finished up 0.42 per cent to 2,189.75.