Hong Kong, mainland stocks continue to toast 2017 gains but turnover remains low

Shares in major baijiu producers enjoy strong rises as Lunar New Year approaches. Hang Seng Index edges ahead to 22,134

PUBLISHED : Wednesday, 04 January, 2017, 9:51am
UPDATED : Wednesday, 04 January, 2017, 10:30pm

The mainland market extended gains into a second day of trading in 2017, but Hong Kong stocks retreated from an earlier rally amid low turnover ahead of the Lunar New Year holidays.

The Hang Seng Index ended just 0.07 per cent lower to 22,134.47, retreating from a higher opening, while the Hang Seng China Enterprises Index shed 0.2 per cent to close at 9,440.99.

“The Hong Kong benchmarks are likely to seesaw within a narrow range and I don’t expect to see turnover pick up before the holidays,” Kingston Lin King-ham, AMTD securities brokerage director said.

“Hong Kong stocks may not find a clear direction until Donald Trump takes office [on January 20].”

Trading turnover in Hong Kong was HK$52.5 billion on Wednesday, which was below HK$60 billion for ten days in a row.

“The capital pool in the mainland is quite tight too,” Lin said, “so inflow to Hong Kong may remain at a low level short term.

Under current situation, investors preferred trading on themes or concepts, such as infrastructure and state-owned enterprises reform
Kingston Lin King-ham, securities brokerage director, AMTD

“Under current situation, investors preferred trading on themes or concepts, such as infrastructure and state-owned enterprises reform.”

China Shenhua Energy Company was the best performer among the 50 blue chips, with shares rising 3.28 per cent to HK$15.12 as its newly announced move into investment in wealth management products was viewed as a smart move.

China’s largest coal miner said on Tuesday night that it was investing 35.25 billion yuan into principal-guranteed entrusted wealth management products, to soak up idle funds for higher returns, compared with bank deposits while maintaining investment risk at a low level amid market volatility.

Transport industry peers China Railway Group rose 2.68 per cent to HK$6.51, with China Railway Construction Corporation increasing 2.39 per cent to HK$10.28.

Zhejiang Shibao Company, a dual listed stock in Shenzhen and Hong Kong, saw its shares surge 6.98 per cent to close at HK$9.2.

Their gains were offset by the fall in oil stocks and actively traded stocks.

PetroChina Company shares dipped 1.33 per cent to HK$14.86, and China Petroleum & Chemical Corporation fell 0.9 per cent to HK$5.52. Most traded Tencent Holdings dipped 0.21 per cent to HK$189.

In the mainland, Shanghai Composite Index closed Wednesday 0.73 per cent higher at 3,158.79, extending the rising streak for three days in a row, with CSI 300 Index rising 0.78 per cent to close at 3,368.31, led by liquor and chemical stocks.

The Shenzhen Component Index ended higher at 10,384.87, up 1.19 per cent, notching up its biggest one-day gain since October 18, 2016. The Nasdaq-like ChiNext also jumped 1.44 per cent to 1,991.57, also the best one-day gain since October 10.

Trading turnover in Shanghai and Shenzhen picked up slightly to 450.7 billion yuan.

“As the new year starts, the Chinese economy is generally stable. Although liquidity remains relatively tight before the Spring Festival holidays, panic about a credit crunch has eased compared with December,” said Wang Hui and Zhou Guang, analysts for China International Capital Corp, in a note on Wednesday.

Shanghai-listed liquor maker Kweichow Moutai Co jumped 5.19 per cent to end at a fresh historic high at 351.91 yuan. Shenzhen-listed Wuliangye Yibin also surged 3.58 per cent to 35.9 yuan and Luzhou Laojiao went up 3.46 per cent to 34.35 yuan.

Consumer demand and prices for traditional Chinese spirits, or baijiu, are expected to climb ahead of the Lunar New Year.

“December is the peak season for the pricey Chinese hard liquor baijiu,” said Pan Fan, an analyst at SWS Research, adding that the spirit is traditionally given as a gift in the mainland during the spring festival.

Baijiu prices fell to a multi-year low early this year amid excess capacity and a slump in consumption amid President Xi Jinping’s anticorruption campaign.