Hong Kong, Shanghai stocks extend rally led by financials, car makers

Geely Auto, which owns Volvo Cars, surges 6.9pc; China Life Insurance up 3.2pc

PUBLISHED : Monday, 13 February, 2017, 9:20am
UPDATED : Monday, 13 February, 2017, 10:16pm

Hong Kong and Shanghai stocks scored their highest finishes in months on Monday after the three major US indices marched further into record territory last week on US President Donald Trump’s promise of a “phenomenal” tax plan.

Hong Kong’s Hang Seng Index extended its bull streak to a fourth straight session and closed up 0.6 per cent or 136 points at 23,710.98, the highest level since October 12.

The Hang Seng China Enterprises Index, which tracks Hong Kong-listed mainland Chinese companies, outperformed the benchmark and advanced 1.3 per cent or 132.63 points to finish at 10,257.84.

Daily turnover in Hong Kong rose further to HK$91 billion, the fourth session it stayed above the HK$80 billion mark.

Capital flows into Hong Kong’s market have gained strong momentum since last Wednesday, when daily turnover jumped 30 per cent from Tuesday’s HK$69 billion. Last week, daily turnover averaged nearly HK$82 billion, up 48 per cent from the previous week.

“The money is flowing back into Hong Kong equities due to multiple factors,” said Ou Yafei, an analyst for GF Securities.

“The yuan has stabilised on China’s capital control measures and January’s data indicated a continued recovery in the Chinese economy, both of which have lifted the market sentiment and prompted mainland investors to increase the allocation to Hong Kong equities,” she said.

“US President Donald Trump has agreed to support the ‘One China’ policy on Taiwan...also easing some of the investors’ concerns on a confrontation between the world’s two largest economies.

“In Hong Kong, the corporate earnings season is about to kick off, with expectations of an improvement in companies’ second half results,” Ou added.

On the mainland, the benchmark Shanghai Composite Index recorded its best close in two months, up 0.6 per cent or 20.14 points to 3,216.84.

The CSI300, which measures the performance of large caps listed in Shanghai and Shenzhen, was up 0.7 per cent to 3,436.28.

In Hong Kong, the corporate earnings season is about to kick off, with expectations of an improvement in companies’ second half results
Ou Yafei, analyst for GF Securities

The Shenzhen Component Index, the Shenzhen Composite Index, and the startup index ChiNext gained 0.8 per cent, 0.7 per cent, and 0.5 per cent respectively, settling at 10,270.83, 1,964.75, and 1,913.68.

Combined turnover for Shanghai and Shenzhen markets slightly decreased to 484.6 billion yuan from last Friday’s 498.6 billion yuan.

Among individual performers, mainland Chinese financial stocks and car makers were notable risers in the Hong Kong market.

China Life Insurance was the top gaining blue chip, jumping 3.2 per cent to HK$24.45. Rivals New China Insurance and Ping An Insurance gained 1.6 per cent and 1.4 per cent each, closing at HK$40.9 and HK$42.2 respectively.

ICBC and Bank of China both rose 1.6 per cent, ending at HK$4.94 and HK$3.80 respectively.

Geely Auto, a privately-owned Chinese car manufacturer that owns Volvo Cars, surged 6.9 per cent per cent to an all-time high of HK$10.78.

In a surprising statement last Friday, index complier Hang Seng Indexes Company said Geely Auto will replace Hong Kong sourcing company Li & Fung as a constituent stock of the Hang Seng Index, effective March 6.

Li & Fung dropped 2.3 per cent to HK$3.34.

Chinese car maker Guangzhou Auto also climbed 4.6 per cent to HK$13.14.

Trading in Hong Kong’s main free-to-air terrestrial television broadcaster TVB was suspended on Monday after the company said it had received an unsolicited “conditional cash partial takeover offer” last Wednesday evening.

In the mainland market, all of the five newly traded stocks on Monday surged by their 44 per cent allowable limit, before trading was suspended.

Chahua Modern Housewares, a household goods producer, rallied 44 per cent to 12.05 yuan in Shanghai, from an IPO price of 8.37 yuan. Gospell Digital Technology Co, which produces digital television and components, rose 44 per cent to 9.06 yuan in Shenzhen, from its IPO price of 6.31 yuan, before trading was halted.

Shanghai Tianyang Hot Melt Adhesives, the bonding material producer, rose 43.98 per cent to 26.19 yuan, from an IPO price of 18.19 yuan.

SI-Tech Information Co, a software provider, rose to 23.27 yuan, from an IPO price of 16.16 yuan, while Yangzhou Chenhua New Material Co, a producer of flame retardants, surged 43.99 per cent to 15.22 yuan, from its IPO price of 10.57 yuan.

In other Asia-Pacific markets, Tokyo’s Nikkei 225 added 0.4 per cent to close at 19,459.15, and Sydney’s S&P/ASX 200 rose 0.7 per cent to 5,760.7.

At the end of last week, all three major US indices advanced to fresh records amid expectations of Trump’s upcoming tax policy.

The Dow Jones Industrial Average rose 96.97 points, or 0.48 per cent, to 20,269.37, the S&P 500 gained 8.23 points, or 0.36 per cent, to 2,316.10 and the Nasdaq Composite added 18.95 points, or 0.33 percent, to 5,734.13.

On Thursday, President Trump promised a major tax announcement in two or three weeks.

“Lowering the overall tax burden on American business is big league,” Trump said in a meeting with airline industry executives.