Hong Kong Stock Exchange

Hong Kong stocks close higher on afternoon rally amid light trading

Hang Seng Index closed up on Tuesday thanks to an afternoon rally led by HSBC

PUBLISHED : Tuesday, 04 October, 2016, 9:13am
UPDATED : Tuesday, 04 October, 2016, 10:20pm

Hong Kong markets closed up on Tuesday after a late-afternoon rally, but turnover remained thin with Chinese markets closed and little data to drive trading, analysts said.

The Hang Seng Index ended trading up 0.37 per cent or 87.49 points to 23,671.92 while the Hang Seng China Enterprises index added 0.70 per cent or 68.19 points to close at 9,751.56.

Mainland markets are closed this week for a national holiday, causing turnover to remain thin at HK$47.19 billion, down from Monday’s HK$49.11 billion.

“There’s very little data overnight to drive the markets or worry the markets at this stage and volumes remain light with China closed,” Haitong International Security’s sales trading managing director Andrew Sullivan said.

“There’s no real macro news to drive this market ... You’re trading with a third less in the market,” he said, referring to the lack of southbound flows from Shanghai-Hong Kong stock connect.

It had been a weak morning after jitters over a possible United States interest rate rise next month, but the market rallied in the afternoon after Deutsche Bank traded stronger in Europe on its lower-than-expected settlement with the US Department of Justice, he said.

Sullivan said HSBC rose 1.21 per cent on the Deutsche Bank news and weaker sterling, which fell to a 31-year low against the US dollar on Tuesday after Prime Minister Theresa May said the country would kick off Brexit formalities by end of March next year.

China’s second largest developer Evergrande was the second most heavily traded stock in Hong Kong, with turnover reaching HK$800.58 million. The developer ended the day up 8.21 per cent to HK$5.67.

The company unveiled plans late Monday to spin off some Chinese assets and list them on the Shenzhen stock exchange in search of better valuations. It said it would spin off its Hengda Real Estate unit to Shenzhen Special Economic Zone Real Estate & Properties in a transaction that would see Evergrande become the controlling shareholder of the Shenzhen-listed company.

Oil support services stocks also rallied, with China Oilfield Services rising 5.25 per cent and Anton Oilfield Services up 26.03 per cent.

China Resources Land and China Overseas Land & Investment both fell to one-month lows, down 2.10 per cent and 1.55 per cent respectively.

Ben Kwong Man-bun, a director at KGI Asia, said the Hong Kong market seemed directionless, with the mainland market closed for the entire holiday week.

Overnight, international market talk had all been about the latest US economic data, which reported the September Markit Manufacturing PMI came in at 51.5, showing US manufacturing expanded at a modest pace in September.

The US non-farm payrolls data, which will be released Friday, will draw market attention as it will provide more clues for a potential US rate increase.

“That’s going to be a key impact as far as what’s going to happen,” Sullivan said. “I think people are going to be a lot more cautious on the interest rate sensitive stocks going towards the end of the week.”

However, for the fourth quarter, Kwong said he expected a further rebound for Hong Kong stocks with the expected support from Shenzhen-Hong Kong stock connect.

“But the rising momentum will not be as strong as in the third quarter due to the potential risks from the US presidential election and US rate rise,” he said.

Overnight on Monday, all three major US stock indices finished lower on what was the first trading day of the fourth quarter.

The Dow Jones industrial average fell 55.54 points, or 0.3 per cent, to 18,252.61. The S&P 500 fell 0.3 per cent, with real estate stocks falling 1.8 per cent to lead the decliners, while the Nasdaq Composite dropped 11.13 points, or 0.21 per cent, to 5,300.87.

In Asian trading on Monday, Tokyo’s Nikkei 225 added 0.83 per cent to close at 16,735.65 and Sydney’s S&P/ASX 200 lost 0.10 per cent.

Hong Kong stocks listed in the US as American Depository Receipts (ADRs) closed mixed compared with their Hong Kong counterparts after conversion into the local currency. China Petroleum & Chemical ’s ADR ended 1.01 per cent higher at HK$5.75, compared with its Hong Kong close of HK$5.63. Semiconductor Manufacturing International dropped 1.39 per cent to HK$0.87. CNOOC jumped 1.1 per cent to HK$9.86.