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Stocks

Hong Kong stocks tick higher, but gains capped as Chinese lenders pull back after reporting earnings

Turnover shrinks further, while Shanghai shares decline for a second day in a row

PUBLISHED : Wednesday, 29 August, 2018, 6:41pm
UPDATED : Wednesday, 29 August, 2018, 6:41pm

Hong Kong stocks closed higher on Wednesday, rising for a third straight session, but gains were capped as major Chinese banks pulled back after reporting half-year earnings.

The Hang Seng Index edged up 0.2 per cent, or 64.82 points, to end at 28,416.44. The Hang Seng China Enterprises Index, also known as the H-shares index, dipped by 0.1 per cent, or 14.53 points, to 11,083.06. Turnover for the main board was HK$80.1 billion (US$10.2 billion), down 11 per cent from Tuesday’s HK$90.5 billion.

“Hong Kong stocks have rebounded this week, as the yuan has stabilised recently after the Chinese central bank signalled its support,” said Lam Ka Hang, managing director for China Demeter Securities.

But weak trading volumes could limit gains on the index, as concerns linger about capital outflows and the US-China trade war. Lam said he expected the Hang Seng Index to remain range bound in the short term, with 28,700 as a major resistance level.

Hong Kong stocks have rebounded this week, as the yuan has stabilised recently after the Chinese central bank signalled its support
Lam Ka Hang, managing director, China Demeter Securities.

Bank of China (Hong Kong) was the top loser among blue chip stocks, tumbling by 2 per cent to HK$38.45 on Wednesday. It dropped 2.2 per cent on Tuesday, after rising for two consecutive sessions.

The bank on Tuesday evening reported a 0.2 per cent increase in net profit for the first six months, matching market expectations. But its net interest margin ratio was at 1.53 per cent, down from 1.63 per cent in the same period last year. HSBC issued a research note and said the net interest margin ratio was weaker than expected, perhaps due to the rising cost of savings.

Moody’s Investors Service also issued a report and affirmed the bank’s ratings with a negative outlook, citing potential reduction in future government support and uncertain future losses for the lender.

Bank of China, the bank’s parent company, retreated by 0.6 per cent to HK$3.61. On Tuesday evening, it posted a 5 per cent increase in net profit for the first half, in line with market expectations. The stock advanced by 2.3 per cent on Monday, but inched down 0.1 per cent on Tuesday.

China Construction Bank lost 0.3 per cent to HK$7.09 and Postal Savings Bank of China dropped by 2.9 per cent to HK$4.62.

Tencent weighed the most on the Hang Seng Index, contributing a loss of 35 points to the gauge. The Chinese social media and gaming giant fell by 1.3 per cent to HK$360.80.

On the mainland, the Shanghai Composite Index dropped for a second day in a row to close at 2,769.29, down by 0.3 per cent from the previous session. The Shenzhen Component Index finished 0.6 per cent lower at 8,678.26.

The combined turnover for the Shanghai and Shenzhen markets decreased by 15 per cent to 246.3 billion yuan (US$36.1 billion) from Tuesday.

Airlines too retreated from recent gains. China Southern Airlines fell by 1.8 per cent to 6.92 yuan. Air China dropped by 0.9 per cent at 7.70 yuan.

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