Hong Kong Stock Exchange

Hong Kong stocks shrug off interest rate concerns, stock connect delay to close higher

Sun Hung Kai Properties slips 0.69 per cent while Henderson Land falls 0.60 per cent on US rate rise fears

PUBLISHED : Friday, 18 November, 2016, 9:14am
UPDATED : Friday, 18 November, 2016, 10:35pm

Hong Kong stocks reversed earlier declines to close higher on Friday, amid rising expectations of a US interest rate rise in December and delays in the launch of Shenzhen-Hong Kong stock connect.

The Hang Seng index ended the day up 0.37 per cent, or 81.33 points, to 22,344.21 while the Hang Seng China Enterprises index rose 0.24 per cent, or 22.77 points, to 9,349.31.

News of a delay in the much-anticipated Shenzhen-Hong Kong stock connect until early December disappointed investors who had been betting on a November 21 launch, which led to weaker early trading.

Charles Li, chief executive of Hong Kong Exchanges and Clearing, said on Friday morning the Shenzhen link will “go live in a few more days”.

However, the market quickly shrugged off the impact of the delay, according to Dickie Wong, executive director of research at Kingston Financial Group.

“We have waited for the new link for as long as one year, and the market will not be seriously hurt by a delay of several days,” Wong said. “Investors are confident that the new connect will finally happen this year, but I don’t expect a big rising momentum from its official launch.”

The delay of the stock connect was the result of a weakening yuan and concerns about southbound capital flows from the mainland into Hong Kong, according to Andrew Sullivan, managing director of sales trading at Haitong Securities International.

Companies expected to directly benefit from the trading link, such as brokerages, felt the pressure.

Citic Securities was down 1.02 per cent to HK$17.44 and Hong Kong Exchanges and Clearing dropped 0.49 per cent to HK$203.

Markets reacted to rising expectations of a US interest rate increase next month after Federal Reserve chair Janet Yellen said during a Congressional hearing on Thursday that rates could move “relatively soon”. Her remarks lifted the US dollar and the 10-year Treasury yield.

The US rate hike will certainly come in December, and the pace for rate increases for the next two years will be quicker than before
Dickie Wong, Kingston Financial Group

The US dollar index continued to consolidate recent gains, trading 0.28 per cent higher at 101.17.

“The US rate hike will certainly come in December, and the pace for rate increases for the next two years will be quicker than before,” said Wong.

But a rallying dollar and rising Treasury yields worry investors in Asia because they result in capital outflows from emerging markets.

Interest-rate sensitive property developers fell, with Sun Hung Kai Properties down 0.69 per cent to HK$100.30 and Henderson Land sinking 0.60 per cent to HK$41.80.

Mainland developer China Vanke added 3.29 per cent after China Evergrande Group said it had lifted its stake in the company to 9.45 per cent.

Among the blue chips, Macau casino operators were among the biggest winners, with Sands China up 1.65 per cent to HK$36.95 and Galaxy Entertainment Group gaining 2.86 per cent to HK$35.95.

Car stocks powered ahead after remarks from Premier Li Keqiang promoting green energy led to speculation about clean-energy vehicles.

The sector rose 0.99 per cent on the whole, with Geely Auto surging 6.76 per cent to HK$7.74.

Energy stocks faced continued losses as oil prices retreated after Opec said October output reached another record. This cast doubt over whether its plan to limit production is achievable or if it can sufficiently ease oversupply in the market, according to a CNBC report.

Coal producers saw losses of 0.57 per cent while mining stocks dropped 0.55 per cent.

China has tried to consolidate the coal industry but reversed earlier restrictions on operations in order to control prices and boost production for the winter months.

China Shenhua slipped 2.47 per cent to HK$15.80 while Zijin Mining dropped 3.07 per cent to HK$2.53.

Heading into next week, the market will be watching closely how president-elect Donald Trump’s policies are playing out, Sullivan said.

On the mainland, the Shanghai Composite Index ended the day 0.49 per cent lower at 3,192.89 while the CSI 300 — which tracks the large caps listed in Shanghai and Shenzhen — was down 0.56 per cent to 3,417.46.

The Shenzhen Component index fell 0.51 per cent to 10,889.11 while the Nasdaq-style ChiNext dropped 0.24 per cent to 2,157.96.

Overnight in US markets, the Dow Jones Industrial Average rose 36 points, or 0.2 per cent, to 18,904. The S&P 500 rose 0.5 per cent, or 10.18 points, to 2,187.12 and the Nasdaq Composite added 0.7 per cent, or 39.4 points, to 5,333.97.

US financials advanced amid heightened expectations of a rate rise, with banks pushing their rally since Trump’s election win back above 10 per cent.

In Asian trading on Friday, Tokyo’s Nikkei 225 added 0.59 per cent to 17,967.41, South Korea’s Kospi lost 0.30 per cent and Sydney’s All Ordinaries traded 0.63 per cent lower at 5,427.53.