Hong Kong Stock Exchange

Hong Kong stocks in relief rally, clawing back post-election losses amid reassessment of Trump win

Mining and insurance stocks were among beneficiaries after President-elect Trump signals New Deal-style infrastructure rebuild

PUBLISHED : Thursday, 10 November, 2016, 9:21am
UPDATED : Thursday, 10 November, 2016, 11:01pm

Hong Kong stocks rebounded on Thursday from sharp losses in the previous session, clawing back almost all the ground lost in a global sell-off that followed Republican candidate Donald Trump’s surprise rise to the White House.

The Hang Seng Index rose 1.89 per cent per cent or 423.92 points to 22,839.11, while the Hang Seng China Enterprises Index moved up 1.78 per cent or 167.19 points to 9,545.85.

The positive sentiment followed major drops on Wednesday, which saw Hong Kong shares plunge to their lowest level since August as it became clear that Trump had edged out Democrat rival Hillary Clinton.

Hong Kong-listed mining stocks rocketed up after Trump indicated in his victory speech that he would implement large-scale infrastructure projects to boost the US economy.

Xixin mining leapt 25.28 per cent, Jiangxi Copper rose 13.66 per cent to a 52-week high and mid-tier miner MMG jumped 11.73 per cent.

Insurance was also among the big gainers, with AIA surging 2.32 per cent to HK$48.55 and China Life gaining 1.57 per cent to HK$19.36.

HSBC shot up 3.45 per cent to HK$60.00 and Tencent Holdings advanced 2.87 per cent to HK$208.2.

In spite of unprecedented media attention during the 18-month campaign leading up to the election, little is known about what Trump actually stands for because he hasn’t outlined his economic policies, Capital Link Investment Holdings chairman and chief executive Brett McGonegal said.

“No one can say with a lot of confidence they have any idea what Trump will do,” McGonegal said.

He added that the stock rally was likely to be short-lived as it was driven by relief over the uncertainty created by the election.

But other analysts said the rebound after a period of uncertainty signals a return of risk appetite as investors realise that a Trump administration could give a boost to the US economy.

“As another black swan this year, the unexpected result of the US election is fundamentally different from Brexit, as it actually brightens the prospects of US economic growth, while the latter leads to gloomier expectations of the UK and EU economy,” said Vincent Ji, a strategist at China Merchants Securities (Hong Kong).

However, Ji sounded pessimistic on the outlook for Hong Kong stocks, citing the high valuation of the index.

“The rebound of the Hang Seng is expected to be short-lived as we don’t expect any significant increase in capital inflows,” Ji said.

HSBC’s head of China and Hong Kong equity strategy, Steven Sun, said investors didn’t need to be “too scared by a Trump win”.

He said mainland Chinese equities hadn’t priced in a Clinton victory, so there was less potential unwinding of positions, while higher renminbi volatility would lead to stronger southbound inflows for the Hong Kong market.

Mainland markets also performed well on Thursday. The Shanghai Composite Index closed the day up 1.37 per cent or 42.91 points to 3,171.28, while the CSI 300 advanced 1.12 per cent or 37.55 points to 3,390.61.

The Shenzhen Component Index rose 1.16 per cent or 124.55 points to 10,821.66 while the Nasdaq-style ChiNext increased 0.92 per cent or 19.48 points to 2,143.32.

Donald Trump’s victory in the presidential election is good news for infrastructure companies and other firms likely to benefit from the One Belt, One Road initiative. The property magnate-turned-politician plans to invest US$ 1 trillion over the next 10 years in high-speed railways and other infrastructure projects, according to research released today by Guotai Junan Securities.

“The optimistic trend in A shares will not change,” said Avic Securities in the latest research note, “Most investors chose to buy in when A shares dipped yesterday, creating a big U-turn, suggesting increased confidence in the market.”

The People’s Bank of China weakened the reference rate of the yuan for a fifth consecutive day, cutting it by 53 basis point to 6.7832. The currency can be traded up to 2 per cent either side of the reference rate.

Other Asian markets bounced back strongly on Thursday. Tokyo’s Nikkei 225 surged by 6.72 per cent, having plunged more than 900 points yesterday. South Korea’s Kospi gained 2.26 per cent, recovering from a 2.2 per cent loss on Wednesday, while Sydney’s All Ordinaries rose 3.26 per cent.

In New York on Wednesday all three major US indices closed higher. The Dow Jones Industrial Average gained 1.4 per cent to close near an all-time high at 18,589, and the S&P 500 advanced 1.1 per cent to 2,163. Meanwhile, the Nasdaq Composite rose 1.1 per cent to close at 5,251.