Bank of China Hong Kong surges to all-time high, boosting Hang Seng Index

Hong Kong stocks gained for the first time in five days on Monday, as financial companies advanced after Morgan Stanley raised its price estimates for Bank of China Hong Kong and on optimism the city’s financial industry will received policy support from Beijing ahead of the handover anniversary.

The Hang Seng Index rose 0.8 per cent, or 201.84 points, to 25,871.89 at the close. The Hang Seng China Enterprises Index, known as the H-shares index, rose 1 per cent, or 100.62 points, to 10,530.66. Mainland China’s CSI 300 Index closed at its highest level in 17 months.

Brokerages including Dongxing Securities expect Beijing to unveil favourable policies to support Hong Kong’s position as Asia’s financial hub in the build-up to the 20th anniversary of the city’s handover to China on July 1. President Xi Jinping is scheduled to attend the anniversary gala on a three-day visit to the city starting June 29, according to the Xinhua News Agency.

“We believe Beijing’s supportive policy [to Hong Kong] is most likely to focus on the financial sector, which should benefit the most local financial industry players with a diverse portfolio of businesses,” said Tan Ke, an analyst with Dongxing Securities.

“Policies related to the 20th anniversary may be the biggest boost for Hong Kong stocks in the near term.”

The People’s Bank of China revealed some detailed rules for the long-awaited Bond Connect scheme last week, allowing overseas investors to buy mainland China’s yuan-traded debt through Hong Kong. However, the launch date has not been announced.

Bank of China Hong Kong (BOC Hong Kong) was the biggest gainer on the Hang Seng Index, surging 6.2 per cent to a record HK$36.80. The rally came after Morgan Stanley reiterated its overweight rating for the stock and raised its target price by 21 per cent to HK$46.