Hang Seng Index hits two-year high as Geely Auto jumps on Volvo venture and Tencent climbs to record

PUBLISHED : Monday, 24 July, 2017, 9:08am
UPDATED : Monday, 24 July, 2017, 10:30pm

Hong Kong stocks closed at a two-year high on Monday, as Geely Auto surged after the Chinese car maker said it will form a joint venture with Volvo to develop electric car technology, and tech giant Tencent Holdings advanced to a record high.

The Hang Seng Index added 0.5 per cent, or 140.74 points, to 26,846.83 at the close, the highest level since June 2015. The Hang Seng China Enterprises Index, also known as the H-share index, gained 0.3 per cent, or 33.82 points, to 10,820.95.

During the past two weeks the Hang Seng Index posted its longest winning streak in more than four years with nine straight days of gains. The city’s stocks are still 21 per cent less expensive than mainland China equities, according to a measure tracking the price difference of the two markets.

“The biggest advantage for Hong Kong shares is that the market is still cheap in terms of valuation,” said Wei Wei, a trader at Huaxi Securities. “The momentum will continue.”

Geely Auto led gains in blue-chip stocks, rallying 5.9 per cent to HK$18.62.

Several investment banks have maintained their positive ratings for the stock, including Nomura and Daiwa Capital, after Geely Auto said last week that it will deepen ties with its subsidiary Volvo Car and establish a 50-50 joint venture to produce systems for electric cars.

Volkswagen eyes China to boost its electric car ambitions

Index heavyweight Tencent added 1.8 per cent to HK$302.20, reaching a record for the stock. Chinese developer Sunac China, owned by tycoon Sun Hongbin, also closed at a record, rising 1.8 per cent to HK$20.10 after Sun said in a Weibo post that he will pay close attention to “cash flows” and put “the company security” as his priority. The stock closed the morning session at HK$21.1, up 6.9 per cent.

Last week, Sunac China entered into a deal to buy 13 tourism projects in China from Dalian Wanda for 43.8 billion yuan (US$6.48 billion). Separately, Sun became the new chairman of the listed arm of LeEco, a Chinese tech group facing mounting debt and losses, after spending billions of yuan to bail out the company.

Casino stocks jumped after JP Morgan raised its target prices for four players in the industry, including Galaxy Entertainment, Sands China, SJM Holdings, and Wynn Macau.

Galaxy Entertainment advanced the most among the sector, rising 3.6 per cent to HK$47.80.

Cheung Kong Infrastructure gained 3.7 per cent to HK$72.25 after a group of investment banks, including Credit Suisse and Daiwa Capital, raised their target prices for the shares after the company said first-half profit rose 2.7 per cent on year.

Mobile phone carrier China Unicom added 2.3 per cent to HK$11.68 after saying it was in negotiations to introduce strategic investors.

China Unicom to boost capital spending on back of fundraising by parent, says analyst

Previously, a Reuters report said Baidu and will join other big Chinese tech firms to jointly invest about US$12 billion in China Unicom’s Shanghai-listed unit.

On the mainland, the benchmark Shanghai Composite Index edged up 0.4 per cent, or 12.62 points, to 3,250.60. The large-cap CSI300 also added 0.4 per cent, or 14.87 points, to 3,743.47.

Gauges of consumer-staples and consumer discretionary stocks rose at least 0.9 per cent as the biggest gainers among industry groups after data showed mutual funds increased holdings of liquor producers and home appliance makers in the second quarter.

Midea Group, the nation’s biggest appliance maker, added 3.6 per cent to 43.42 yuan and liquor producer Wuliangye Yibin advanced 2.2 per cent to 55.91 yuan.

The ChiNext Price Index, a gauge of China’s start-up stocks, lost 0.2 per cent, or 3.71 points, to 1,686.44.

Qtone Education Group tumbled 6.1 per cent to 10.47 yuan in Shenzhen. The China Securities Regulatory Commission opened a probe into its controlling shareholder Chen Zhichang and Lin Xiaoya, the shareholder acting in concert, for allegedly breaching rules of information disclosure, the ChiNext-listed company said in an exchange filing.

Additional reporting by Laura He

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