Hong Kong, Shanghai stocks rise despite Trump TPP worries

Trade pact partners talk of potential for China to join the TPP

PUBLISHED : Tuesday, 24 January, 2017, 9:19am
UPDATED : Tuesday, 24 January, 2017, 10:17pm

Hong Kong stocks closed higher on Tuesday, ignoring a retreat in US shares triggered by US president Donald Trump’s order to withdraw from the multinational Trans-Pacific Partnership (TPP).

However, investors warn of future turbulence in mainland and Hong Kong if Trump turns his anti-China rhetoric into concrete policies.

The TPP, which Washington had signed but did not ratify, aimed to deepen economic ties between US and other Pacific-rim nations. China is not a TPP member.

The latest move by Trump, along with his pledge to protect American companies and workers, has led to concerns over reduced trade with Asian economies.

Despite that, the Hang Seng Index rose 0.22 per cent or 51.34 points to 22,949.86 at Tuesday’s close. The Hang Seng China Enterprises Index, or the H-shares index, climbed 0.33 per cent or 32.44 points to 9,759.26.

The rise was helped by solid gains in oil companies, after crude futures rose in Asian trade on Tuesday. PetroChina advanced 1.65 per cent to HK$6.18. Sinopec also closed 1.64 per cent higher to HK$6.20.

Castor Pang Wai-san, head of research at Core Pacific Yamaichi, said the Chinese government’s drive to cut overcapacity and inventory would continue to benefit the commodity sector, but the potential of shrinking exports to the US poses a long-term threat.

“If Trump wants to boost US economic growth, the trade deficit between US and China needs to be reversed,” Pang said. “Right now, not much has been announced, but I guess any policy related to trade would be the turning point.”

Hannah Li, strategist for UOB Kay Hian, said the Hong Kong benchmark would hover around 23,000 with investors “in a holiday mood” before the Lunar New Year.

On the mainland, the Shanghai Composite Index reversed early losses and ended up 0.18 per cent or 5.77 points to 3,142.55, and the large-cap CSI300 index gained a marginal 0.01 per cent higher to 3,364.45.

Losing the United States from the TPP is a big loss, there is no question about that. But we are not about to walk away ... certainly there is potential for China to join the TPP
Australian Prime Minister Malcolm Turnbull

However, the ChiNext Index, a gauge of startup stocks, lost 1.38 per cent to 1,861.22, while the Shenzhen Composite Index went down 0.30 per cent to 1,896.45.

Pang said the Chinese government and major investors seemed to be pumping money into heavyweight stocks to keep the Shanghai Composite above 3,100, while small tech stocks in Shenzhen were left tumbling on market uncertainties.

The temporary liquidity boost by the People’s Bank of China ahead the holiday had also helped stabilised the market, Li said.

“I don’t think it will rebound strongly, as the PBOC’s move is mainly aimed at easing the seasonal cash squeeze,” Li said. “It doesn’t mean China will loosen the monetary policy.”

Two initial public offerings on the mainland, meanwhile, both surged 44 per cent on their debuts.

Anhui Jiyou New Materials, which started trading on the Shanghai Stock Exchange, soared by its daily-increase limit of 44 per cent to close at 21.6 yuan soon after market open.

Jiangsu Zhangjiagang Rural Commercial Bank, which debuted on the Shenzhen Stock Exchange, advanced 43.94 per cent to 6.29 yuan.

On Monday, US stocks closed lower after Trump signed an executive order officially withdrawing the country from the 12-nation trade pact.

The Dow Jones Industrial Average inched down 0.1 per cent to close at 19,799.85, with General Electric’s 2.6 per cent loss weighing heavily on the index.

The S&P 500 dropped 0.3 per cent to end at 2,265.20. The Nasdaq Composite Index also nudged lower by less than 0.1 per cent to 5,552.94.

The US dollar weakened against a basket of major currency rivals, while gold futures rallied amid uncertainty, with gold futures for February delivery settled at their highest level in two months.

Australia and New Zealand said on Tuesday they hope to salvage the Trans-Pacific Partnership (TPP) by encouraging China and other Asian countries to join the trade pact.

“Losing the United States from the TPP is a big loss, there is no question about that,” Turnbull told reporters in Canberra on Tuesday. “But we are not about to walk away ... certainly there is potential for China to join the TPP.”

Japan’s Nikkei Average still fell 0.55 per cent to 18,787.99 on Tuesday amid trade concerns. Australia’s S&P/ASX 200 moved up 0.8 per cent to 5,652.90 on higher copper and gold prices.

Additional reporting from Reuters