HSBC surges 6 per cent, lifting Hang Seng Index in broad blue chip rally

Morgan Stanley increases HSBC’s target price to HK$84

PUBLISHED : Thursday, 29 June, 2017, 9:13am
UPDATED : Thursday, 29 June, 2017, 9:49pm

Sino-British banking giant HSBC Holdings surged 6.3 per cent on Thursday, propelling Hong Kong stocks higher, after Morgan Stanley increased significantly the target price for the stock.

Market sentiment also received a general boost as Chinese President Xi Jinping started a three-day visit to the city ahead of Hong Kong’s handover anniversary.

The Hang Seng Index climbed 1.1 per cent, or 281.92 points, to 25,965.42 at the close. The Hang Seng China Enterprises Index, which tracks the performance of selected mainland companies listed in Hong Kong, added 0.2 per cent to 10,432.02.

“Hong Kong stocks’ uptrend remains intact,” said Dai Ming, a fund manager at Hengsheng Asset Management. “Factors supporting the rally, such as cheap valuations and the yuan’s weakness, are still there.”

Hong Kong stocks are among the best-performing markets in Asia this year, with the Hang Seng Index rising 18 per cent, as mainland investors buy assets denominated in the city’s currency that is pegged to the US dollar as a hedge against the yuan’s depreciation. The city’s equities are now still 21 per cent cheaper than mainland shares, according to an index tracking the price difference of the two markets.

The Hang Seng Index may rise to as high as 29,000 in the fourth quarter before falling back to around the current level towards the end of the year because of higher borrowing costs and weak earnings growth, according to China Construction Bank. The lender’s year-high target of 29,000 represents an 11 per cent rise from Thursday’s close.

Nearly all the blue-chip stocks rose on Thursday.

The biggest contributor to the Hang Seng’s gain was HSBC, which has a 10 per cent weighting in the benchmark. It was up 6.3 per cent to HK$72.80, contributing more than 100 points to the index.

The gains came after Morgan Stanley raised the price target to HK$84, up 20 per cent from HK$70 previously. The investment bank reiterated an “overweight” rating on the stock, expecting its Hong Kong businesses to benefit from wider net interest margins on the back of rising interest rates.

Chinese online major Tencent, which also has a 10 per cent weighting, gained 0.4 per cent to HK$284.

Other market shakers included Chinese car maker Geely Auto, which soared 4.7 per cent to HK$17.28. It was the second biggest gainer among Hang Seng constituents.

Bank of Communications International had upped its target price for Geely Auto by more than 30 per cent to HK$22.15 from a previous HK$16.5. It expects the company to post robust earnings growth in the first half of this year.

Shares of BOC Hong Kong, the Hong Kong-listed arm of Bank of China, jumped 3.2 per cent to HK$38.90. China Shenhua Energy, the country’s largest state-owned coal miner, gained 4.4 per cent to HK$17.08. China Resources Power was up 2.5 per cent to HK$15.48.

Hong Kong-based developer Hang Lung Properties rose 3.9 per cent to HK$19.42 and Hang Seng Bank added 2.8 per cent HK$165.40.

President Xi arrived in Hong Kong on Thursday and set out his aim to usher the city into a new future, kicking off a three-day tour ahead of the 20th anniversary of the handover. His speeches in the coming days can be expected to elaborate on themes, including the future direction for the city after 20 years of pursuing the experiment of “one country, two systems”.

On the mainland, the Shanghai Composite Index added 0.5 per cent, or 14.86 points, to 3,188.06. The large-cap CSI 300 Index rose 0.6 per cent, or 22.66 points, to 3,668.83.