Hong Kong stocks close out April with 2.4pc gain, but analysts warn higher volatility likely in May

Rising US interest rates and the brewing trade war between the US and China are two major uncertainties

PUBLISHED : Monday, 30 April, 2018, 9:16am
UPDATED : Monday, 30 April, 2018, 11:06pm

Hong Kong stocks closed sharply higher on Monday, ending April on positive note, but analysts were cautious about the market outlook in May, as rising US rates could spark faster-than-expected capital outflows and US-China trade uncertainty could hurt tech stocks.

The Hang Seng Index advanced 1.7 per cent, or 527.78 points to close at 30,808.45. For April, the index rose 2.4 per cent, snapping a two-month losing streak.

The Hang Seng China Enterprises Index, known as the H-share index, rose 2.2 per cent, or 264.81 points, to 12,331.39. It logged a monthly gain of 2.8 per cent in April.

The main board’s daily turnover decreased 4 per cent to HK$93.6 billion from the previous trading session. The Hong Kong market will be closed on Tuesday for Labour Day and reopen on Wednesday.

Mainland markets were shut on Monday and will also resume trading on Wednesday.

“Rising US treasury yields and the uncertainty surrounding US-China trade tensions will continue to keep the market under pressure,” said Ben Kwong, executive director for KGI Asia.

Higher US treasury yields will trigger capital outflows from Hong Kong and push up interest rates, which will hurt equities, he added.

Tony Ho, director of research for China Goldjoy Securities, suggested caution on trading next month, as the trade dispute between the US and China spreads to the tech sector, which could strengthen the odds of “sell in May and go away” and sink tech shares, which drove Hong Kong markets last year.

Still, Ho said MSCI’s scheduled inclusion of A shares in June could spark capital inflows to the Chinese stocks before hand and potentially reignite the market.

On Monday, financial and tech shares both shone. Ping An Insurance advanced 1 per cent to HK$77.55, after its spin-off health care service app Ping An Good Doctor priced its closely-watched IPO at the top end, raising US$1.1 billion in Hong Kong’s biggest offering so far this year.

China Construction Bank jumped 3 per cent to HK$8.32, and Bank of China climbed 2.4 per cent to HK$4.30, after China extended the grace period before it imposes new strict regulations on the country’s US$15 trillion asset management industry to the end of 2020.

Tencent Holdings gained 0.7 per cent to HK$391.00, and Sunny Optical Technology (Group) improved by 3.7 per cent to HK$130.10.

“Lots of IPOs are coming to Hong Kong and more Korean peninsula peace talks are on the horizon, boosting stocks such as Tencent,” said Louis Tse Ming-kwong, director of VC Brokerage. 

Elsewhere in Asia, South Korea’s Kospi rose 0.9 per cent to end at 2,515.38. Japanese markets were closed for a public holiday. 

Xiaomi, the world’s fifth-largest smartphone manufacturer, is also looking to jump onto the Hong Kong IPO bandwagon, seeking to raise at least US$10 billion, according to Bloomberg.

The Hong Kong stock exchange announced last week details of its highly-anticipated new listing rules, allowing companies with dual-class share structure and biotech firms that have yet to make profits to list here.