Hong Kong Stock Exchange

Defence stocks push Chinese market to 15-month high as North Korea ratchets up anti-US rhetoric

Hong Kong market sees biggest drop so far in April amid sell-off in the financial sector

PUBLISHED : Tuesday, 11 April, 2017, 9:28am
UPDATED : Tuesday, 11 April, 2017, 10:24pm

China’s benchmark index closed at a 15-month high on Tuesday, boosted by gains in defence stocks amid an increasingly tense military standoff between North Korea and the US.

The Shanghai Composite Index underwent a “V-shaped” reversal to finish 0.6 per cent higher at 3,288.97, the best close since early January of 2016. The CSI 300 Index gained 0.4 per cent to 3,517.3, the Shenzhen Component Index increased 0.5 per cent to 10,655.8 and the Nasdaq-like ChiNext gained 0.3 per cent to 1,917.6.

In Shanghai, Avic Heavy Machinery surged 10 per cent, the maximum daily change allowed, to 17.67 yuan. Zhonghang Heibao also hit the limit, reaching 33.6 yuan.

North Navigation Control Technology soared 7.1 per cent to 18.99 yuan, its best level since August 2015.

The rally came after North Korea warned of “catastrophic consequences” to what it called “reckless acts of aggression” by Washington after a US aircraft carrier strike group was deployed to the Korean Peninsula.

“We will hold the US wholly accountable for the catastrophic consequences to be entailed by its outrageous actions,” North Korea’s state-run Korean Central News Agency reported, citing a foreign ministry spokesman. “[North Korea] is ready to react to any mode of war desired by the US.”

Hong Kong’s stock market, meanwhile, saw its biggest drop so far in April, amid a sell-off in the financial sector after China’s insurance regulator became the subject of an official disciplinary probe.

The Hang Seng Index closed at 24,088.5, down 0.7 per cent, or 173.7 points, having at one stage fallen 254 points. The Hang Seng China Enterprises Index lost 0.9 per cent to 10,166. Total turnover rose 18 per cent to HK$76.8 billion.

Banking and insurance stocks led losses in Hong Kong after the mainland’s corruption watchdog placed insurance regulator Xiang Junbo under investigation for violating party discipline.

China Life Insurance fell 1.1 per cent to HK$23.05, its fourth straight day of losses, while People’s Insurance Co Group of China lost 0.6 per cent to HK$3.18.

“H-shares underperformed the Hang Seng Index today. I think investors are concerned about regulatory changes in financial sectors, after the investigation of CIRC’s disgraced chairman Xiang Junbo and banking regulators issuing new guidelines on credit risk management [yesterday],” said Sam Chi-yung, senior strategist at South China Research.

Agricultural Bank of China, Industrial and Commercial Bank of China, China Merchants Bank and China Construction Bank all notched up losses of more than 1 per cent.

China’s banking regulator urges lenders to up their risk management measures

Making its trading debut, Guotai Junan Securities, China’s third-largest broker by assets, closed flat at HK$15.84 after raising about HK$16.5 billion through its initial public offering in Hong Kong.

China Finance Investment Holdings crashed by as much as 85 per cent then recovered some ground to close at HK$0.054, down 57.5 per cent. The dramatic movement sparked rumours that shares pledged by major shareholders faced margin calls.