Hong Kong stocks see small rise as strong company earnings offset trade war concerns

Hang Seng recovers from early loss sparked by a media report of stiff tariffs on Chinese goods, with strong earnings from smartphone camera firm Sunny Optical lifting the mood

PUBLISHED : Tuesday, 20 March, 2018, 9:03am
UPDATED : Tuesday, 20 March, 2018, 9:36pm

Hong Kong stocks eked out a small gain on Tuesday, as optimism over company earnings after Sunny Optical Technology Group posted strong results offset concerns that planned US tariffs on Chinese goods could spark a trade war.

The Hang Seng Index added 0.1 per cent, or 36.17 points, to close at 31,549.93. It had fallen as much as 1.1 per cent early in the session after a report by The Washington Post that US President Donald Trump was expected to impose US$60 billion of tariffs on Chinese goods this week, roughly double what senior aides had originally proposed.

“Even if some Hong Kong stocks rise on positive earnings results, there will be profit-taking pressure over global trade tensions,” said Linus Yip, chief strategist for First Shanghai Securities.

The Hang Seng China Enterprises Index, or the H-share gauge, dropped 0.5 per cent.

Helping the Hang Seng recover was Sunny Optical, whose shares surged 8.6 per cent to a record HK$159.80 after the supplier of camera parts to smartphone makers including Apple, Huawei and ZTE reported net income of 2.9 billion yuan (US$458.2 million) last year, beating an estimate of 2.7 billion yuan from analysts polled by Bloomberg.

Also gaining on earnings hopes were Tencent Holdings, the biggest weighting on the Hang Seng Index, which added 1 per cent to HK$466.60 before its earnings release on Wednesday. The internet giant was set to report a 43 per cent profit increase last year, according to data compiled by Bloomberg.

Geely Automobile Holdings added 2.2 per cent to HK$27.50, 6 per cent shy of its all-time high set in November. The carmaker is also due to release its annual results on Wednesday. Profit may have surged 95 per cent in 2017, Bloomberg data showed.

Other analysts said that the tariffs, which The Washington Post said would apply to more than 100 Chinese products allegedly developed using stolen American intellectual property, were more of a gambit than a reality.

“The chance of an all-out global trade war is slim as Trump simply wants to use that as a tool to start negotiations to win advantage,” said Dai Ming, a fund manager at Hengsheng Asset Management in Shanghai. “Earnings from major companies on the Hong Kong market are pretty strong and that’s helping the sentiment here.”

Elsewhere on the Hong Kong market, property developers fell on concerns that higher interest rates would weaken their ability to repay their debts and would mean more expensive mortgages for homebuyers.

The chance is 80 per cent that the US Federal Reserve will raise interest rates by 25 basis points after the end of its two-day policy meeting on Wednesday, according to Bloomberg. Because Hong Kong’s currency is pegged to the US dollar, Hong Kong interest rates would also rise if the Fed acted.

New World Development declined 1.5 per cent to HK$11.54, China Vanke slid 2.3 per cent to HK$32.65 and Wharf Holdings eased 1.8 per cent to HK$27.40.

China Literature, the online literature unit spun off from Tencent, dived 3.1 per cent to HK$79.50 despite reporting its annual turnover rose 60 per cent year on year to 4.1 billion yuan in 2017 and net profit jumped 14-fold.

In mainland China, the Shanghai Composite Index inched higher by 0.4 per cent, or 11.39 points, to 3,290.64. The CSI 300 Index added 0.1 per cent, while the Nasdaq style ChiNext jumped 1.2 per cent.