Hong Kong’s Hang Seng Index has best day in a month driven by gains in HSBC, China economic data

Although China reported a fourth straight month of increase in industrial giants’ profits in August, the Shanghai benchmark ended lower
HSBC shares surge 7.8 per cent to HK$30.4 after Ping An said it had bought HK$305.5 million worth of the bank’s shares on Friday

Stocks

Yujing Liu

Published: 10:36am, 28 Sep 2020

Why you can trust SCMP

Hong Kong stocks posted their biggest daily increase in a month on Monday, boosted by optimism over China’s bright economic data in August and progress over a US stimulus plan, while China-listed shares pulled back in cautious trading ahead of a long public holiday.

The Hang Seng Index climbed 1 per cent to 23,476.05 for its best day since August 24 after recording the steepest weekly loss since March last week. The gains were driven by a strong rally in financials led by HSBC Holdings, after China’s Ping An Insurance Group raised its stake in Europe’s largest bank.

Meanwhile, the Shanghai Composite swung between gains and losses before ending 0.1 per cent lower at 3,217.53. The Shenzhen Component Index also declined 0.4 per cent, while the ChiNext Index of start-ups listed in Shenzhen dropped 0.8 per cent.

“Hopes for US stimulus package and robust China data auger well, but the resurgence of Covid-19 clouds the view,” said Stephen Innes, chief global market strategist at AxiCorp.

China reported a fourth straight month of increase in the industrial giants’ profits on Sunday. Profits of large firms grew 19.1 per cent in August from the same period last year, though this was slightly slower than the 19.6 per cent increase in July.

In addition, US House Speaker and Democratic leader Nancy Pelosi and Treasury Secretary Steven Mnuchin agreed to restart negotiations on a US$2.4 trillion coronavirus stimulus plan after talks fell apart in early August.

The sentiment on the A-share market remains cautious. As the eight-day National Day holiday draws near, investors rushed to offload some of their holdings ahead of the break. Trading on the Shanghai and Shenzhen exchanges will be paused from Thursday and resume only next Friday.

“Near term, the US risk-off trade ahead of November’s US presidential election has affected onshore and offshore sentiment for Chinese equities, adding to the negative sentiment including a new wave of Covid-19 cases in parts of Europe,” said Wendy Liu, head of China strategy at UBS Global Research, in a note on Monday.

Media reports that UK policymakers are considering a total social lockdown in the country after daily cases hit a record high last week have deepened worries over the global economy amid a resurgence of coronavirus in Europe.

In addition, investors will also be watching closely the first debate between Donald Trump and Democratic presidential nominee Joe Biden on Tuesday, to gauge the potential outcome of the November 3 election. Biden, who is seen as more predictable than Trump in foreign affairs, will be a better choice for Hong Kong and China stocks, according to analysts.

In Hong Kong, financial stocks advanced broadly on improved sentiment from HSBC. Hong Kong Exchanges and Clearing, the bourse operator, rose 1.4 per cent to HK$360.6. China Construction Bank, the country’s second-largest lender by assets, added 1 per cent to HK$5.07.

SMIC fell 3.9 per cent in Hong Kong on reports that the US government has imposed restrictions on exports to China’s largest chip maker. Photo: EPA-EFE

Apart from financials, Chinese smartphone maker Xiaomi also drove major gains in the benchmark index, as it added 2.4 per cent to HK$20.2. Chinese home appliance giant Gree Electric invested 3.5 billion yuan in an industry fund launched by Xiaomi that focuses on opportunities in semiconductor, artificial intelligence and other cutting-edge technology, according to mainland media reports.

China Evergrande Group, the country’s largest property developer by sales, rocketed 20.6 per cent to HK$16.62, rebounding from a deep sell-off on Friday triggered by a fake document circulated on social media that suggested the company’s cash flow was in huge trouble.

The saga, which centres around the developer’s plan to achieve a so-called back-door listing in Shenzhen through restructuring with Shenzhen Special Economic Zone Real Estate & Properties, continued on Sunday. The Shenzhen-listed firm, which is supposed to buy Evergrande’s unit Hengda Real Estate, called for care and patience in assessing the deal, even though four years have passed since the plan was first mooted.

Meanwhile, Semiconductor Manufacturing International Corporation (SMIC) dropped 3.9 per cent to HK$17.86 following reports that the US government has imposed restrictions on exports to China’s largest chip maker, citing risks of products being diverted to military use.

This is the latest blow to China’s semiconductor industry after telecommunications giant Huawei Technologies was placed on a US blacklist, known as the entity list, which barred its access to high-end chips.

Post