Daily Report

Hong Kong stocks rally as Brexit momentum shifts towards ‘remain’; Shanghai stocks end little changed

The Hang Seng Index gains 1.69 per cent; Shanghai Composite Index adds 0.1 per cent

PUBLISHED : Monday, 20 June, 2016, 9:27am
UPDATED : Monday, 20 June, 2016, 6:17pm

Hong Kong stocks closed sharply higher on Monday, fueled by a slight shift in sentiment towards a “remain” vote in the British referendum on membership of the EU.

The Hang Seng Index closed at 20,510.2, up 1.69 per cent or 340.22 points, while the Hang Seng China Enterprises Index, which tracks Chinese stocks listed in Hong Kong, rose 1.81 per cent or 153.64 points to 8,639.51.

Hanna Li Wai-han, a strategist at UOB Kay Hian (Hong Kong), said Hong Kong stocks continued to climb on Monday because of a slight swing back in favour of Britain staying in the European Union.

Investor sentiment in recent weeks has been largely determined by Britain’s debate over whether to stay in the EU and bookmakers’ odds suggest the chances of a “Leave” vote have faded since the shooting-death of pro-European lawmaker Jo Cox on Thursday.

Linus Yip, First Shanghai Securities chief strategist said equity markets are swinging following the movements in opinion polls about Brexit vote.

“The banking sector is the most sensitive to Brexit Vote,” said Yip. These banks especially the international ones will be in great volatility following any opinion polls movements about the Brexit vote.

Another positive factor for Hong Kong stocks performance was the statement by Deng Ge, a spokesman for the China Securities Regulatory Commission, who said on Friday that the Shenzhen Hong Kong Stock Connect will be launched this year.

In Hong Kong, the insurance sector showed the biggest gains, rising 1.96 per cent as a group, closely followed by banking stocks, which were up 1.83 per cent.

Among the top five active shares in the Hong Kong market, HSBC Holdings led the gains, jumping 3.46 per cent to HK$49.35, while China Construction Bank added 2.18 per cent to HK$5.16. Bank of China increased 1.35 per cent to close at HK$3.00.

Li cautioned that the rally in Hong Kong stocks may stall as investor sentiment is still weak ahead of Thursday’s Brexit vote.

“Hong Kong stocks are likely to slump and you will see a strong outflow from the Hong Kong equity market if Britain votes to leave EU,” said Li.

The Shanghai Composite Index edged up 0.13 per cent to close at 2,888.81 while the CSI300 edged slightly higher, rising 0.07 per cent to close at 3,112.67. The Shenzhen Composite Index climbed 0.44 per cent to 1,909.12 while ChiNext dropped 0.15 per cent to 2,119.63.

Shell companies listed on mainland markets slumped on Monday after China’s securities regulator issued a stringent regulation draft last Friday aimed at tightening supervision of back-door listings.

‘Shell company’ shares plunge as China tightens back-door listing approvals

A total of 42 shell companies among the 58 traded ones in this sector declined in mainland markets, while 16 companies fell by the daily downward limit of 5 per cent, according to mainland data provider Eastmoney.

With additional reporting by Vivian Lin