Hong Kong, China stock markets start 2017 on a high as manufacturing index hits four-year high

Analysts warn more uncertainties lie ahead as Trump prepares to take up his presidency and China deals with its domestic economic problems

PUBLISHED : Tuesday, 03 January, 2017, 9:40am
UPDATED : Tuesday, 03 January, 2017, 11:00pm

Positive economic data and new year’s spirit lifted both the Hong Kong and mainland markets as the first trading day of 2017 closed, but analysts warned more uncertainties lie ahead in the new year than in 2016.

The Hang Seng Index (HSI) opened slightly lower, but rose 0.57 per cent to 22,126.01 by the close. The mainland benchmark Shanghai Composite Index (SCI) advanced 1.04 per cent to close at 3,135.92.

Stock gains came after a private gauge of China’s manufacturing sector reached a four-year high for December.

The Caixin/Markit Manufacturing Purchasing Managers’ index (PMI) climbed to 51.9 in December from 50.9 in November on a seasonally adjusted basis, beating market estimates. It marked the highest level of the index since January 2013.

Onshore yuan closed slightly weaker at 6.9557 per US dollar, 0.09 per cent down from the previous closing at 6.9495, after the central bank set the daily fixing at 6.9498 in the morning, the biggest cut in two weeks.

In 2016, the onshore yuan lost 6.6 per cent against the greenback, marking the biggest annual drop since 1994.

Hong Hao, chief strategist at Bank of Communications International Holdings, said the first quarter of 2017 may see positive markets, with industrial and energy stocks performing well. However, “uncertainties are likely to unfold as Trump takes the presidency”.

“Meanwhile, apart from dealing with rising challenges outside the country, the Chinese authorities are walking a fine line to tackle the rising asset bubble at home while maintaining economic growth, which is a tough job and easy to trigger a misstep,” he added.

China’s SCI index was the world’s fourth-biggest loser of 2016 among 94 major indices, declining 12.3 per cent in local currency terms, and falling as much as 18 per cent if converted into US dollars. Only the stock indices of Lusaka, Ghana and Laos performed worse than Shanghai.

A year ago, the Chinese markets kept everyone on their toes. A year later, the outlook certainly appears to be more optimistic
Jingyi Pan, market strategist for IG Group

“A year ago, the Chinese markets kept everyone on their toes. A year later, the outlook certainly appears to be more optimistic, though we may have to bring back the catchphrase of ‘cautious optimism’ going into the new year as we search for clarity, ” said Jingyi Pan, a market strategist for IG Group.

Also on Tuesday, the Hang Seng China Enterprises Index, which tracks the performance of Hong Kong-listed Chinese companies, also moved up 0.61 per cent or 57.06 points to 9,451.93.

Insurance, banking and energy stocks led the gains in Hong Kong’s market.

Among other major mainland indices, the large-cap CSI300 index rose 0.97 per cent to 3,342.23. The Shenzhen Composite Index added 0.86 per cent to 1,985.95, and the Shenzhen Component Index gained 0.84 per cent to 12,123.87. The Nasdaq-style ChiNext Index added 0.06 per cent to close at 1,963.26.