Hong Kong hits 2016 high, edging ever closer to 22,000

Sixth straight gain buoyed by expectations of additional monetary stimulus

PUBLISHED : Monday, 18 July, 2016, 9:23am
UPDATED : Monday, 18 July, 2016, 11:05pm

Hong Kong stocks ended at a 2016 high after rising for their sixth consecutive day on Monday, buoyed by expectations of additional monetary stimulus, and better-than-expected economic data for the second quarter.

The Hang Seng Index increased 0.66 per cent or 143.93 points to 21,803.18, while The Hang Seng China Enterprises Index added 0.46 per cent or 41.29 points, to close at 9,090.95.

Turnover, however, was relatively slim at HK$ 55.54 billion, the lowest in a week.

Analysts said market sentiment was improving slowly with interest in defensive stocks likely to continue among investors.

Utility and bank shares were the bigger gainers, while local Hong Kong property developers and airlines also saw increases.

Sino Land Company gained 2.7 per cent to HK$13.68. New World Development jumped 2.28 per cent to HK$ 8.54. Cathay Pacific Airways improved 1.95 per cent to HK$12.56 after Hong Kong airport reported a more than 5 per cent rise in passenger numbers for the first half on year.

Lenovo Group shares surged 7.59 per cent to HK$5.10, outperforming its blue-chip peers, after the computer and handset maker announced plans to launch a smartphone with augmented reality in September.

Mark To, head of research at Wing Fung Financial Group, said defensive stocks with absolute returns and stable share prices, such as real estate investment trusts, would continue to be welcomed as investors remain concerned about the negative-yield environment globally.

Hanna Li Wai-han, a strategist at UOB Kay Hian (Hong Kong) said the recent rally in Hong Kong stocks was driven by strong liquidity, after monetary easing policies were expected to be announced by the Bank of Japan and Bank of England to support both their economies.

“Hong Kong stocks will continue to increase this month, only if market expectation of further monetary easing policies does not cool,” added Li.

To said he was confident the Hang Seng Index could hit 22,000 this week, after the benchmark last week rose above its 250-day moving average for the first time this year.

Sentiment remained strong that the US would postpone any decision to increase interest rates, he said, adding the market took confidence, too, that China’s economic growth in the second quarter was not as bad as expected. A sharp drop in the yuan, he cautioned, was the biggest risk.

Hong Kong stocks will continue to increase this month, only if market expectation of further monetary easing policies does not cool
Hanna Li Wai-han, a strategist at UOB Kay Hian (Hong Kong)

Li from UOB said the rally in Hong Kong stocks remained fragile, however, and longer term fundamentals remain weak.

Mainland China stocks retreated on Monday after three weekly gains in a row.

The Shanghai Composite Index fell 0.35 per cent or 10.73 points to close at 3,043.56 The CSI300 — which tracks large companies listed in Shanghai and Shenzhen — stood at 3,262.02, down 0.44 per cent.

The Shenzhen Composite Index lost 0.53 per cent or 10.86 points to 2,027.88 while the Nasdaq-style ChiNext shed 0.61 per cent to 2,249.87.

Education sector-linked shares led the losses, down 3.34 per cent on average as a group. Mining industry also dropped 0.9 per cent.

China Minsheng Banking Corp saw its shares in the mainland and in Hong Kong enjoy a more than 2 per cent bounce, after major shareholder Lu Zhiqiang added to his holdings.