Hong Kong stocks hit 25-month high as PetroChina, Evergrande advance

China Evergrande soars 18pc after issuing a positive earnings alert; HSBC also in focus ahead of quarterly earnings release on Monday

PUBLISHED : Wednesday, 26 July, 2017, 9:15am
UPDATED : Wednesday, 26 July, 2017, 10:41pm

Hong Kong stocks rose on Wednesday, with the Hang Seng benchmark climbing to a 25-month high, as PetroChina and CNOOC advanced on higher oil prices and China Evergrande surged after saying first-half profit may have tripled.

The Hang Seng Index gained 0.3 per cent, or 88.97 points, to 26,941.02 at the close, the highest level since June 25, 2015. It rose as much as 0.6 per cent in Wednesday’s intraday trading to top 27,000 for the first time in two years. The Hang Seng China Enterprises Index, also known as the H-share index, added 0.5 per cent, or 48.76 points, to 10,831.50. Mainland China’s equity benchmark also closed higher.

Buying from mainland and overseas investors has driven the Hang Seng Index up by 22 per cent this year, as investors take advantage of its lowest valuation among Asia’s major stock markets. The city’s equities are now 22 per cent cheaper than mainland’s yuan-traded A shares, according to a gauge tracking the price difference between the two markets.

“The valuation advantage is the key to why Hong Kong stocks are doing so well this year, particularly for these blue-chips,” said Wu Kan, a fund manager at Shanshan Finance in Shanghai. “It looks like the good trend isn’t ending here and the market still has the chance of a catch-up in valuation.”

The valuation advantage is the key to why Hong Kong stocks are doing so well this year
Wu Kan, fund manager at Shanshan Finance

Oil producers jumped after crude futures rose above US$48 a barrel for the first time since early June overnight. PetroChina gained 3.1 per cent to HK$5.05, the top gainer among blue-chip stocks. Offshore oil producer CNOOC climbed 2.3 per cent to HK$8.77.

China Evergrande surged 18 per cent to HK$20.90 after saying first-half profits probably tripled to 21.3 billion yuan (US$3.15 billion) from a year ago.

Hang Seng Bank added 0.7 per cent to HK$166.80, the highest level in 10 years, approaching an all-time high of HK$166.9 set in late 2007.

AAC Technologies, which supplies acoustic components for Apple’s iPhones, tumbled 2.8 per cent to HK$103.50, the worst performer among blue-chip stocks.

The sell-off on AAC resumed on Wednesday after the shares plunged 15 per cent last Friday, spurred by reports from investment banks, including Morgan Stanley and JPMorgan, projecting slowing second-quarter revenue growth for the company based on information they gleaned on a visit to its factory earlier in the week.

AAC Technologies clarified in a Tuesday statement that it didn’t disclose any information related to earnings to the analysts who were invited to the tour.

Index heavyweight HSBC Holdings slipped 0.2 per cent to HK$76.55 ahead of its release of interim results due Monday.

On the mainland, the Shanghai Composite Index added 0.1 per cent to 3,247.67 at the close, as a rally in copper producers countered the decline in consumer stocks. The CSI 300 Index of large-cap shares and the ChiNext index of smaller firms both retreated 0.4 per cent.

Jiangxi Copper, China’s biggest producer of the metal, jumped 7.3 per cent to 20.12 yuan in Shanghai, the highest close since February 12. Yunnan Copper gained 3.9 per cent to 15.65 yuan. Futures for the metal used for wiring and house building are trading at a two-year high on rising demand from China.

On Shenzhen’s ChiNext board, Beijing Kunlun Tech jumped 8.6 per cent to 23.13 yuan, while JSTI Group surged 7.7 per cent to 19.77 yuan. Exchange filings showed that a state-backed fund had bought the stocks in the second quarter to become fifth-largest shareholder of the two companies.

The disclosures mark the first time that the state fund had been among the top 10 shareholder of any ChiNext-listed start-up company.

On Tuesday in New York, the Dow Industrial Average rose 0.5 per cent to 21,613.43. Caterpillar and McDonald’s both reported better-than-expected quarterly results, sending their shares 5.6 per cent and 4.7 per cent higher respectively.

The S&P 500 gained 0.3 per cent to a record 2,477.13. The Nasdaq Composite was up 1.37 points to a record 6,412.17.