Stocks enjoy best rally in three weeks as investors gauge US presidential debate

Hang Seng rises 1.09pc to 23,571.9, led by mining stocks ahead of Wednesday’s Opec member meeting

PUBLISHED : Tuesday, 27 September, 2016, 9:16am
UPDATED : Tuesday, 27 September, 2016, 10:42pm

Hong Kong stocks ended higher on Tuesday, despite overnight losses on Wall Street as market sentiment improved with investors taking a positive view of the first presidential debate of the 2016 US election campaign.

Markets initially saw “muted trade” at the opening on Tuesday, as investors digested the televised clash between US presidential candidates Hillary Clinton and Donald Trump. But prices later rallied as the TV 90-minute encounter continued.

The Hang Seng Index ended up 1.09 per cent or 253.98 points, at 23,571.9, the biggest gain in three weeks, while the Hang Seng China Enterprises Index climbed 1.22 per cent or 117.21 points to 9,746.56.

KGI Asia director Ben Kwong Man-bun said he felt the market reacted “quite positively” to the at-times heated exchanges, and rose in response to a strong performance from Clinton, who is seen to have more predictable policy stances.

“The markets always take Donald Trump as the black swan,” Kwong said.

Linus Yip, chief strategist at First Shanghai Securities, said although the TV duel improved stock market sentiment, he does not expect any continued market rebound, especially as southbound inflows into Hong Kong [via the Shanghai Stock Connect trading link] will stop during China’s national holiday.

“The city’s benchmark will find it hard to break the critical level of 24,000 points, short term,” he added. “Heavyweight stocks such as Tencent and HSBC, as well as banks, expect to bear the brunt when the southbound shuts off for 11 days.”

The city’s benchmark will find it hard to break the critical level of 24,000 points, short term
Linus Yip, chief strategist, First Shanghai Securities

The southbound trading link will close from September 29 to October 10.

Kwong also said in the short term markets will focus on fund flows from China to Hong Kong.

“In the absence of the inflow from Chinese investors, there are concerns whether Hong Kong stocks can trade higher on their own,” he said.

The Hang Seng has seen some support after Monday’s slump, its largest drop in two weeks, but the rebound will be capped at 23,800 points, Kwong said.

In Hong Kong on Tuesday, coal stocks were the biggest gainers, jumping 7.24 per cent on average as a group, led by Mongolia Energy, which surged 87.5 per cent, and Siberian Mining Group, which rose 33.96 per cent.

The sector’s strong performance comes ahead of Wednesday’s Opec member meeting in Algeria, where investors are banking on a cut or a freeze in oil production.

Gaming stocks also advanced, with Galaxy Entertainment tacking on 1.58 per cent to HK$28.90, while Wynn Macau and Sands China were up by 2.36 per cent and 3.1 per cent, respectively.

Kwong said gaming stocks have been strong for the past few days, with investors hoping Macau will see an influx of Chinese visitors during the golden week holiday.

In the mainland, benchmark stock indexes also increased. The Shanghai Composite Index edged ahead 0.60 per cent or 17.74 points to 2,998.17, while the CSI 300 added 0.64 per cent or 20.47 points to 3,240.75.

The Shenzhen Component index rose 0.81 per cent or 84.27 to 10, 476.97 and the Shenzhen Composite Index increased 0.75 per cent or 14.66 points to 1,981.26 while ChiNext jumped 0.84 per cent or 17.90 points to 2,140.80.

Andrew Sullivan, Haitong International’s managing director of sales trading, noted data released on Tuesday morning showed China’s industrial sector activity picking up, with profits in August increasing 19.5 per cent, up from the 11 per cent gain in July.

“It seems that the industrial sector is still doing well, but again that means less scope for further easing,” Sullivan said.

“It also raises questions over the government’s progress of transforming the economy into one more focused on the service sector rather than heavy industry.”