Hang Seng at fresh 2-year high; China’s startup index continues rising

China Resources Land up 4.1pc, leading gains among Hong Kong blue chips.Hang Seng adds 0.7 per cent, or 190.15 points, to 27,131.17

PUBLISHED : Thursday, 27 July, 2017, 9:16am
UPDATED : Thursday, 27 July, 2017, 11:00pm

Hong Kong’s Hang Seng Index advanced to its highest level in 25 months on Thursday, as rate-sensitive property developers soared after the Federal Reserve refrained from raising interest rates, and Internet giant Tencent Holdings hit a fresh record.

The Hang Seng added 0.7 per cent, or 190.15 points, to 27,131.17 at the close, a level not seen since June 25, 2015. The Hang Seng China Enterprises Index, known as the H-share index, edged up 0.3 per cent to 10,858.19.

The mainland’s ChiNext gauge of small-cap shares surged the most in a year with a more than 3 per cent gain, spurred by optimism that the measure’s 11 per cent decline this year was excessive and that a state-linked fund has bought shares of companies on the board for the first time.

Low interest rates adopted by global central banks and the starts of the Stock Connects with mainland exchanges have triggered capital inflow into the city’s equities, the cheapest in valuation among Asia’s major markets, to push up the Hang Seng by 48 per cent since it dropped to an almost four-year low in February 2016.

The Federal Reserve kept interest rates unchanged during its latest two-day meeting that concluded on Wednesday after raising borrowing costs by one percentage point since 2015.

Liquidity will remain adequate for a while and that’s good for the equity market. The party on the Hong Kong stock market isn’t over yet
Wang Chen, a partner at Xufunds Investment Management in Shanghai

“Liquidity will remain adequate for a while and that’s good for the equity market,” said Wang Chen, a partner at Xufunds Investment Management in Shanghai.

“The party on the Hong Kong stock market isn’t over yet.”

China Resources Land led the rally among property stocks on optimism the Hong Kong monetary authority will following the Fed in keeping interest rates unchanged due to the city’s currency pegging to the greenback. The stock gained 4.1 per cent to HK$25.35, the top gainer among Hang Seng Index’s constituents.

Link Real Estate Investment Trust climbed 2.9 per cent to HK$62.75. China Overseas Land & Investment rose 2.3 per cent to HK$26.65. New World Development added 2.1 per cent to HK$10.48.

Hang Lung Properties slipped 0.1 per cent to HK$19.32.

Underlying first-half profit at Hang Lung, excluding revaluation gains in investment properties, dropped 4 per cent from a year earlier to HK$3.04 billion, as rental incomes decreased because of renovation works in major malls, the company said in an exchange filing at noon on Thursday.

Tencent, which has a 10 per cent weighting in the Hang Seng Index, advanced 2.5 per cent to record HK$308.40 after media reports said it is in talks to invest US$400 million in India’s ride-hailing app Ola.

PetroChina gained 0.4 per cent to HK$5.07 after the nation’s biggest oil producer said profits for the first six months may have surged as much as 21 fold due to an increase in crude prices.

IMAX China, the provider of IMAX theatre systems for cinemas, tumbled 1.8 per cent to HK$21.40, after posting a 7.1 per cent drop in first-half profit.

In the mainland, the ChiNext index jumped 3.6 per cent, the biggest gain since May 31 last year. Trading volumes on the gauge doubled the five-day average. The benchmark Shanghai Composite Index rose 0.1 per cent to 3,249.78.

“There’s some sector rotation to the underperforming small-cap shares as some investors move out of main-board companies to hunt for bargains,’’ said Wang at Xufunds.

“It’s like a one-off rebound after a persistent decline.”

Out of 661 companies on the ChiNext board, 583 rose with 27 hitting their 10 per cent daily limit. Gaming company Beijing Kunlun Tech and construction contractor JSTI surged 10 per cent, extending Wednesday’s rally, after China Securities Finance Corp – a state-backed major buyer of stocks in the 2015 market rout – bought stock to become a major shareholder in the two companies.

Zhejiang Huace Film & TV climbed 9.4 per cent in the second quarter to 11.48 yuan after the movie producer said China Securities Finance bought a 2.9 per cent stake to become its fifth largest shareholder.