Hong Kong and China stocks advance, shrugging off Trump’s protectionist speech to cheer China’s surging birth rates

President’s promises to ‘buy American and hire American’ in his inauguration speech; some profit-taking likely ahead of holidays

PUBLISHED : Monday, 23 January, 2017, 9:16am
UPDATED : Monday, 23 January, 2017, 9:55pm

Mainland Chinese stocks closed higher on Monday for a second straight session, as market sentiment received a modest boost after the People’s Bank of China injected a record amount of cash last week into the banking system to ease the liquidity squeeze before the Lunar New Year holidays.

The Hong Kong market also notched slight gains fuelled by Wall Street’s rally last Friday following the inauguration of US president Donald Trump.

Baby formula manufacturer Yashili soared almost 10 per cent in Hong Kong to its highest close in over a month after China announced its birth rate in 2016 rose to the highest level since 2000, thanks to the “two-child” policy.

The Shanghai Composite Index rose 0.4 per cent or 13.63 points to end at 3,136.77, the highest close since January 10. The index closed up 0.7 per cent on Friday.

The CSI300 gained 0.3 per cent or 9.19 points to 3,364.08. The Shenzhen Component Index and the Shenzhen Composite Index advanced 0.7 per cent and 0.9 per cent respectively to 9,976.19 and 1,902.14. The Nasdaq-style ChiNext finished up 0.4 per cent at 1,887.32.

Combined turnover for Shanghai and Shenzhen markets increased slightly from Friday, but still remained at a low level of 332 billion yuan from Friday.

“Market liquidity has tightened, as Chinese people tend to pull money away from the stock market before the Lunar New Year to prepare for the festivities,” said Su Peihai, an analyst at Guangzheng Hang Seng Securities.

“Concerns also persist over the accelerated pace of initial public offerings, which could drain more funds away from the market,” he added.

To ease the liquidity squeeze, the People’s Bank of China injected a net 1.19 trillion yuan into the money market last week, the highest weekly net injection on record.

“I think the stock market won’t have big fluctuations in the near term, as the central government usually will keep the market stable near the politically important Two Sessions, which will start soon after the Lunar New Year holidays,” Su said.

The Two Sessions refer to the annual meetings of the National People’s Congress and the Chinese People’s Political Consultative Conference, which usually take place on March 5 each year.

In the meantime, Hong Kong’s benchmark Hang Seng Index ended higher after choppy trade, up 0.1 per cent or 12.61 points to 22,898.52. The Hang Seng China Enterprises Index ticked up 0.1 per cent or 11.1 points to 9,726.82.

We must protect our borders from the ravages of other countries making our products, stealing our companies, and destroying our jobs,” he said in the speech. “Protection will lead to great prosperity and strength.
US President Donald Trump during his inaugural speech

Turnover for Hong Kong market was relatively unchanged from Friday at HK$56 billion.

Ben Kwong, executive director of KGI Asia, said he does not expect large moves in the benchmark index before the Lunar New Year holiday.

“Initially the market reacted positively to the rise on Wall Street, but then investors turned a little bit cautious ahead of the holidays,” Kwong said.

“We see some profit-taking pressure as the index hovers around 23,000,” he said.

In Hong Kong, baby formula manufacturers and dairy shares posted strong gains, after China announced that births in 2016 increased to 17.86 million, up significantly from the yearly average of 1.4 million from 2011 to 2015, marking the highest level since 2000.

Statistics from the National Health and Family Planning Commission showed that second born children accounted for more than 45 per cent of the total births in 2016.

End of China’s one child policy sees births rise to 18.46 million in 2016 ... but it’s still not enough

Yashili International Holdings, the country’s top baby formula maker, surged 9.7 per cent to close at HK$1.58, the best closing level in more than a month. China Mengniu Dairy Company advanced 1.6 per cent to HK$14.22.

Diaper maker Hengan International also rose 1.4 per cent to HK$59.8.

On the mainland, national defence-related shares surged after Beijing announced on Sunday that President Xi Jinping would head a new commission overseeing joint military and civilian development.

Beijing BDStar Navigation was suspended from trading after rising by the 10 per cent daily limit to 30.57 yuan. Xi’an Tian He Defense Technology also soared 10 per cent to close at 26.49 yuan.

On Friday, US stocks closed higher after US President Donald Trump promised to “buy American and hire American” in his inauguration speech.

The Dow Jones Industrial Average finished 0.48 per cent higher at 19,827.25 on Friday, snapping a five-session losing streak. The S&P 500 was up 0.3 per cent to 2,271.31 and the Nasdaq Composite gained 0.28 per cent to 5,555.33.

US President Donald Trump, in his inaugural speech more, reinforcing concerns about potential protectionist trade policies

Trump’s address also reinforced concerns about potential protectionist trade policies.

“We must protect our borders from the ravages of other countries making our products, stealing our companies, and destroying our jobs,” he said in the speech. “Protection will lead to great prosperity and strength.”