Daily Report

Hong Kong stocks enjoy week’s first rally, as Brexit worries ease

PUBLISHED : Wednesday, 29 June, 2016, 9:14am
UPDATED : Wednesday, 29 June, 2016, 6:50pm

Hong Kong stocks enjoyed their first rally in four days on Wednesday, following Britain’s vote to leave the European Union last week sent markets worldwide tumbling.

The city’s stocks ended up 1.31 per cent, the biggest daily gain in ten days as worries over Brexit eased, said analysts.

The Hang Seng Index finished 263.66 points ahead at 20,436.12 following a rebound of stock markets in the United States and Europe overnight, and the Hang Seng China Enterprises Index jumped 0.41 per cent or 35.28 points to 8,571.44.

China Merchants Securities (HK) chief strategist Cliff Zhao said the Hang Seng fully reflected the impact of Brexit, after plunging over 6 per cent from highs earlier this month.

“As the Hong Kong market has fully priced in external factors, it could rebound on a recovery in sentiment in the near term with the catalyst [being] the upcoming Shenzhen Hong Kong Stock Connect,” the company’s analysts concluded in a note.

Zhao and his team did, however, caution the link could now take longer to announce due to the Brexit, with July to August “the perfect timing”.

Victor Au, chief operating officer at Delta Asia Securities agreed, adding that Hong Kong stocks seem to have digested the negative impact from Brexit.

Ongoing low turnover, however, signals that investors are still very cautious despite Wednesday’s 1.31 per cent rise, he added. Turnover on Hong Kong’s main board on Wednesday was HK$ 63.58 billion.

All the top five active shares jumped on the day with the most-heavily traded HSBC rising 1.29 per cent to HK$46.95.

Banking and insurance sectors were among the biggest gainers, increasing 1.24 per cent and 1.06 per cent respectively.

The Bank of East Asia outperformed its blue-chip peers, rising 3.19 per cent to HK$29.1, while Hong Kong Exchanges and Clearing shares rose 1.14 per cent to HK$186.4, fully recovering from their losses seen after the Brexit referendum.

HKEX chief executive Charles Li Xiaojia said on Tuesday that Brexit would have no direct impact on the launch of the Shenzhen stock connect, and it would not hurt its subsidiary, the London Metal Exchange.

Au remained cautious for Hong Kong stocks in the second half of this year, as “there are a lot of uncertainties ahead”.

“I do not expect a big increase in Hong Kong stocks, but wish no slump.

“The index should fluctuate between 19,000 and 21,100,” said Au.

Morgan Stanley and Credit Suisse, however, maintain bearish outlooks on the Hong Kong market, expecting the city’s benchmark to slip to 18,500 amid global turmoil after the Brexit vote.

Mainland stocks extended small gains for the third straight day. The Shanghai Composite Index moved 0.65 per cent ahead to 2,931.59 on Wednesday while the CSI 300, which tracks the large caps listed in Shanghai and Shenzhen, increased 0.48 per cent to 3,151.39.

The Shenzhen Composite Index closed 0.15 per cent or 2.97 points up to 1,973.34 while the Nasdaq style ChiNext lost 0.31 per cent or 6.92 points to 2,209.79.