Hong Kong stocks inch up slightly as yuan retreat dents turnover

The Hang Seng Index gained 2.28 per cent in the first week of 2017, the best performance since the week ending October 7

PUBLISHED : Friday, 06 January, 2017, 9:19am
UPDATED : Friday, 06 January, 2017, 9:14pm

Hong Kong stocks ended slightly higher on Friday with trading turnover falling back, as Chinese yuan retreated from a sharp jump a day earlier.

Mainland stocks dipped before China releases December’s foreign exchange reserve data on Saturday.

The Hang Seng Index closed Friday trading up 0.21 per cent or 46.32 points at 22,503.01, while the Hang Seng China Enterprise Index increased 0.13 per cent to 9,611.05.

On a weekly basis, the Hang Seng Index gained 2.28 per cent, the best performance since the week ending October 7, 2016. This week’s advance compares with a 6.67 per cent drop in the first week of 2016.

Daily turnover on the main board fell 10 per cent to HK$58.14 billion, after climbing above HK$60 billion for the first time in 11 days on Thursday.

Hannah Li, an analyst for UOB Kay Hian, said the main effect on the Hong Kong market this week was the movement of the Chinese currency.

“On Friday the offshore yuan retreated from Thursday’s sharp jump,” Li said, “Consequently the turnover in the stock market fell back. I don’t think the rally of yuan is sustainable.”

Technically, the Hang Seng Index managed to stay above the 50-day-average level of 22,475, but it still faces resistance at 22,640, Li said.

Martin Zhong, an analyst at FXTM said, “The market was surprised by yuan’s jump as it broke investors’ expectation of a one-day depreciation of the currency. But the recent strength didn’t reverse the yuan’s falling trend against the US dollar.”

Analysts expect an increase in trading turnover in the coming days to bring more momentum to Hong Kong stocks as more investors come back from new year holidays. Traders will be closely watching the data for Chinese foreign exchange reserves in December, which will be released on Saturday.

Hengan International Group Company was the best performer among the 50 blue chips, its shares rising 2.24 per cent to HK$59.4 after data showed its major investor Credit Suisse Trust spent HK$34 million to increase its stake to 42.02 per cent on December 30.

The Wharf (Holdings) Limited shares rose 2.18 per cent to HK$56.25 after the company said it is considering selling its pay-TV unit, i-CABLE Communications. i-CABLE shares jumped 17.11 per cent to end at HK$0.89.

Among the sectors, energy stocks were standout winners, after oil futures settled at their highest level in a week on Thursday night. Steel, coal, gaming and insurance sectors dropped.

PetroChina briefly touched a 14-month high of HK$6.14, before closing at HK$6.04, still up 1.17 per cent. Sinopec also gained 1.93 per cent to HK$5.82, while CNOOC shares dipped 0.1 per cent down to HK$9.95.

The most traded stock, Tencent Holdings, closed 0.93 per cent higher at HK$195.1, the highest level since November 28.

In the mainland, the Shanghai Composite Index ended its four-day rally, dropping 0.35 per cent to 3,154.32, despite gains across the oil, utility and environment sectors. The CSI 300 Index also shed 0.6 per cent to 3,347.67.

The Shenzhen Component Index lost 0.79 per cent to 10,289.36, with the Nasdaq-like ChiNext falling 0.95 per cent to 1,965.03.

The Shanghai Composite Index gained 1.63 per cent in the week, compared with a 9.97 per cent plunge in the first week of 2016, as the Chinese government pushed forward a circuit-breaker system that triggered more panic sell-offs.

Additional reporting by Laura He

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