China and Hong Kong stocks end little changed, as analysts see market momentum turning upwards

Hang Seng Index ends 0.2pc lower while Shanghai Composite edges up 0.1pc to close at its highest level since early January

PUBLISHED : Tuesday, 25 October, 2016, 9:09am
UPDATED : Tuesday, 25 October, 2016, 10:32pm

Hong Kong and mainland stocks ended little changed on Tuesday, although a late advance helped to lift the Shanghai benchmark to a nine-month high.

The Shanghai Composite Index closed at 3,319.4, inching up 0.12 per cent to the highest closing level since January 8th, according to Bloomberg data. But the gap between the peak and trough of the day was only 11.45 points, one of the lowest daily point swings in nearly 14 years. The CSI 300, which tracks large companies in Shanghai and Shenzhen, stood flat at 3,367.45, closing the session down only 0.12 point. The Shenzhen Component Index inched up 0.27 per cent to 10,871.5 while Nasdaq-like ChiNext lost 0.03 per cent to 2,200.21.

Analysts said overall sentiment is picking up despite short-term consolidation, as several uncertainties overhanging the market have dissipated.

Among sectors, steel and coal makers both rose. Baoshan Iron & Steel jumped 2.15 per cent to 5.69 yuan, while China Coal Energy surged 7 per cent to 7.03 yuan as the Chinese government urged coal makers to increase production to stabilise the coal price.

In Hong Kong, the Hang Seng Index closed 0.17 per cent lower at 23,565.11, as a fall in banking stocks offset gain in Macau casinos. The benchmark index swung between from 23,506.6 to 23,631.3, the narrowest daily point range since August 12. Trading turnover fell to HK$55.4 billion, from HK$74.1 billion on Monday.

However, southbound capital flows through the Shanghai-Hong Kong Stock Connect continued to rebound, reaching 1.28 billion yuan (HK$1.47 billion), up from 713 million yuan on Monday, notching the biggest daily inflow since October 11.

The Hong Kong market is building support and may go up from here, said Linus Yip Sheung-chi, chief strategist at First Shanghai Securities.

“In Hong Kong, there is some kind of consolidation,” Yip said. “But overall, the markets are still in a good mood.”

Ricky Huang, a financial analyst at Lukfook, said that Hong Kong stocks will head higher as concerns about the pace of China’s annual economic growth diminish. He added that investors were expecting Hillary Clinton to beat rival Donald Trump in US presidential elections scheduled for November 8, to be followed by an interest rate rise in December.

“As the yuan continues to depreciate, the southbound capital inflow will remain positive,” Huang said.

Ma Jun, chief economist of the People’s Bank of China’s research bureau, said on Tuesday that a 6.7 per cent annual economic growth rate for China is almost a certainty.

Investors are taking a wait-and-see approach to US economic growth data for the third quarter due to be released on Friday, while also watching corporate earnings’ results for the third quarter.

Macau casino operator Galaxy Entertainment outperformed its blue-chip peers, its shares rising 2.78 per cent to HK$31.45, followed by 1.59 per cent gain for its rival Sands China, which closed at HK$35.05.

Footwear retailor Belle International saw its shares tumble 9.14 per cent to HK$5.07, becoming the worst performer among blue chips, as its net profit for the six months ended August 31 fell 19.7 per cent year on year to 1.73 billion yuan. But cosmetic retailor Sa Sa International Holdings jumped 9.85 per cent to a one-year high at HK$3.68, after the company said its same store sales in Hong Kong and Macau during the golden week holiday rose 12.4 per cent year on year.

Bank of China Hong Kong retreated 0.89 per cent to HK$27.9. The bank gained on Monday amid reports that it had agreed to sell Chiyu Banking to Xiamen International Bank for US$3 billion, but it clarified on Monday afternoon that no deal had been reached and it is still exploring disposal opportunities.