HK stocks pare earlier gains to close at 9-month high

Tencent jumps 5.2pc, China Unicom up 7.6pc, and gains too for Ping An Insurance and Lenovo, after heavyweights issue strong interims

PUBLISHED : Thursday, 18 August, 2016, 9:21am
UPDATED : Thursday, 18 August, 2016, 11:01pm

Hong Kong stocks pared earlier gains but still closed higher on Thursday, after touching a nine-month high in the morning, as a batch of companies reported better-than-expected earnings and the latest minutes from the US Federal Reserve showed a rate hike may be unlikely in the near term.

The Hang Seng Index rose just under 1 per cent or 223.38 points on Thursday to close at 23,023.16.

It touched 23,193.9 in the morning, the highest level since early November. The Hang Seng China Enterprises Index also moved up 0.13 per cent to end at 9,654.69.

“The Federal Reserve minutes made investors believe that a rate increase in September is unlikely, while a more than 5 per cent jump in heavyweights stocks like Tencent largely pushed up the benchmark,” said Kenny Wen Kit, a wealth management strategist at Sun Hung Kai Financial.

“Market sentiment has certainly warmed up, as daily turnover on the main board has been above a high level of HK$80 billion in recent days.

“We are quite positive the Hang Seng Index can reach 23,400, near term, while company results and data from US will lead to ups and downs,” he added.

“The retreat in the afternoon session was mainly caused by profit-taking,” added Zhao Wenli, the chief strategist at China Merchants Securities (Hong Kong).

“I don’t see any particular pressure for the market in the short term,” said Zhao, “not until mid September to October, when the possibility of a Fed interest rate hike is expected to increase risks for Hong Kong market again,” he added.

Index heavyweight Tencent Holdings jumped 5.18 per cent to close at HK$203. It briefly touched HK$205 in the morning, its highest level since debuting in Hong Kong in 2004.

On Wednesday, the online major reported a 47 per cent year-on-year growth in second-quarter net profit, which amounted to 10.7 billion yuan (HK$12.5 billion).

China Unicom outperformed its blue-chip peers and surged 7.64 per cent to HK$9.05, the highest level in more than three months. The telecom company reported a less-than-expected drop in net profit for the first half of the year. Wang Xiaochu, its chairman, insisted what has been its most-dfficult period “will soon be over”.

I don’t see any particular pressure for the market in the short term... not until mid September to October, when the possibility of a Fed interest rate hike is expected to increase risks for Hong Kong market again
Zhao Wenli, chief strategist at China Merchants Securities (Hong Kong)

Ping An Insurance closed 2.52 per cent higher at HK$40.7, after the Chinese insurer reported on Wednesday that net profit increased 17.7 per cent year-on-year in the first six months of the year.

Lenovo Group gained 2.24 per cent to HK$5.47, as the company’s net profit for the three-month period ended June 30 beat analysts’ consensus estimates.

Overnight on Wednesday, minutes from the Fed’s meeting on July 26 and 27 showed officials were divided in the urgency to raise the rate, as inflation did not pick up quickly while the labour market showed progress.

The news triggered a rally in US major stock indexes and Hong Kong stocks’ American Depository Receipts (ADRs).

In the mainland, the Shanghai Composite Index closed at 3,104.11, down 0.17 per cent or 5.44 points. The CSI300, which tracks large caps listed in Shanghai and Shenzhen, also ended down 0.25 per cent to 3,364.5.

In Shenzhen, the Shenzhen Component Index fell 0.11 per cent to 10,879.2. The Nasdaq-like ChiNext dipped 0.3 per cent to 2,201.59.

Property developers were among the best performers of the day.

China Vanke, the country’s largest residential developer, reversed gains and closed 1 per cent lower in Shenzhen. It briefly rose over 6 per cent in the morning.

China’s home prices in 70 major cities increased 0.79 per cent year on year in July, up for ten months in a row, according to Reuters’ calculations based on data from the National Bureau of Statistics.

Insurance, cement and department store stocks recorded the strongest gains.