Hong Kong stocks rally as British PM’s Brexit speech cheers global markets

Attention now shifts to Friday, and Donald Trump’s inaugural speech in Washington. Fears remain over a potential trade war between China and the US

PUBLISHED : Wednesday, 18 January, 2017, 9:14am
UPDATED : Wednesday, 18 January, 2017, 10:43pm

Hong Kong stocks rallied on Wednesday, with the Hang Seng Index ending afternoon trading up 1.13 per cent, or 257 points, to 23,098, rising above the psychologically key 23,000 level for the first time in a month and hitting a two and half a month intraday high.

The Hang Seng China Enterprises Index ended 1.04 per cent, or 100 points, higher, at 9,802.

The rally on the Hong Kong bourse comes as the British Prime Minister delivered her policy speech on Brexit on Tuesday, easing mounting concerns on how she planned to exit the European Union which sent the pound soaring overnight, as well as pushing up stocks with exposure to European market.

All sectors in Hong Kong advanced, led by industrial firms and energy majors as shipping, computer component and steel stocks led the gains.

Mainland China stocks were mixed, amid renewed weakness in small-caps and worries about Donald Trump’s approach to Beijing, with The Shanghai Composite Index closing 0.14 per cent, or 4.24 points higher to 3,113 while the blue-chip CSI 300 index closed 0.4 per cent higher to 3,339 on Wednesday.

However, Shenzhen’s Component Index and the Nasdaq-like ChiNext both closed lower. Underscoring a recent shift in investor preference, the start-up board ChiNext closed down 1.18 per cent, or 22 points, to 1,845 after the previous session’s rebound as weighed down by its leading stock LETV that dropped 2 per cent to 38.13 yuan per share. The Shenzhen Component Index lost 0.22 per cent to close at 9,804.

“I don’t think the rally in Hong Kong market will continue for the next two days as there is too much uncertainty hanging around Trump’s inauguration.

People are eagerly waiting his detailed economic plans before buying,” said Tommy Ong from DBS, adding there’s unlikely to be much movement in the market until people are sure about if there is going to be a trade war between China and the US, as a result of his planned policies.

“The rally could return if there are no extreme plans rolled out by Trump,” said Ong.

Cheung Kong Infrastructure, with 60 per cent of its net profit derived from the UK, saw its shares surge 2.38 per cent to a one-month high of HK$62.4 during the trading session.

Cheung Kong Property gained 3.25 per cent to HK$52.35 after Li Ka-shing announced on Tuesday a plan to spend HK$183.3 million buying its shares at HK$50 to HK$50.8.

The repurchase plan came after Li announced on Monday that three of his firms would acquire Australian energy company Duet Group.

HSBC Holdings rose 1.01 per cent to HK$64.85, its highest level since December 9, but Standard Chartered shed 0.49 per cent to HK$71.

With the Hang Seng managing to reverse its sliding trend after it broke the 23,000 threshold, Wong expects to see a small short-term rally.

Hong Kong Chief Executive Leung Chun-ying delivered his last policy address on Wednesday afternoon, but his final address had little effect on Hong Kong stocks.

In the mainland Chinese markets, construction, transportation and material stocks, also seen as concept stocks for Beijing’s “One Belt, One Road” initiative, gained the most.

Both the yuan and pound retreated from rallies on Tuesday, while the US dollar index inched up slightly to 100.52 at the lunchtime break.

US President-elect Donald Trump said in an interview with the Wall Street Journal that the US dollar was “too strong” to compete with its trading counterpart China. His remarks dragged down the index by 0.9 per cent to 100.28, the weakest level since early December, and pushed up the yuan over 500 points offshore in Hong Kong.

Britain’s Theresa May took a softer-than-expected approach in a speech on Brexit late on Tuesday night when she promised a parliamentary vote before making a clean break between the UK and the European Union. The speech outlined Britain’s major objectives on Brexit before the formal negotiations begin in March.

Following May’s speech, sterling soared 3.07 per cent to US$1.2415 as uncertainty about the UK’s future relationship with the EU was reduced.

Additional reporting by Jennifer Li