Hong Kong stocks off to flying start on the first day of trading in 2018

Hang Seng Index climbs sharply to above 30,000; Shanghai Composite rises the most in four months

PUBLISHED : Tuesday, 02 January, 2018, 9:39am
UPDATED : Tuesday, 02 January, 2018, 11:29pm

Hong Kong stocks started the first day of trading in 2018 with a bang.

The Hang Seng Index ended Tuesday above the key 30,000 mark for the best finish since November 2007, thanks to a policy boost from the Chinese central bank to support liquidity in the banking system and the regulator’s plan to launch a trial programme to allow full circulation of H shares.

The HSI closed up 2 per cent, or 596.16 points, at 30,515.31, extending the bullish streak to a sixth straight session.

The Hang Seng China Enterprises Index, or the H-share index, jumped 3.1 per cent, or 359.69 points, to 12,068.99.

Daily turnover for the main board surged 64 per cent to HK$127 billion (US$16.2 billion).

Among the 51 constituent stocks on the HSI, 41 rose, eight fell, while two remained unchanged.

In 2017, Hong Kong’s HSI rose 36 per cent, the best performer among major stock markets across the globe, on the back of robust corporate earnings and southbound flows from mainland China.

“Today’s strong start reflects confidence in the outlook of global growth, [which is expected] to boost corporate profits,” said Stanley Chan, the director of research at Emperor Securities.

“Integration between Hong Kong and China, with the completion of the Hong Kong-Zhuhai-Macau bridge and the high-speed rail expected this year, is also a positive.”

Last week, the People’s Bank of China announced a new mechanism that will allow some banks to reduce the amount of reserves they need to keep with the central bank.

The move will help “promote smooth money market operations and support financial institutions’ financial services before and after the Lunar New Year”, the central bank said.

“The new liquidity tool is likely to inject over 1 trillion yuan (US$154 billion) in funds. Together with the targeted RRR (reserve requirement ratio) cut announced in September, they will both help alleviate tight liquidity conditions,” Tommy Xie, Greater China economist at OCBC Bank said in a research note.

Also last week, China Securities Regulatory Commission announced it would start a pilot programme to remove the ban on share sale of owners of state-owned enterprises, or so-called “full circulation of H shares”, a move that could significantly increase the public float of Hong Kong-listed mainland companies if fully enacted and boost the liquidity levels on the Hong Kong market.

Hong Kong Exchanges & Clearing, the city’s sole bourse operator, surged 4.3 per cent to HK$250.2.

Insurtech firm ZhongAn Online P&C Insurance, widely anticipated as one of the potential trial companies, advanced 1.4 per cent to HK$70.3.

Brokerage firm Citic Securities gained 4.2 per cent to HK$16.8, while Guotai Junan International Holdings jumped 3.7 per cent to HK$2.54.

Chinese banks advanced broadly, with China Construction Bank up 3.1 per cent to HK$7.42, and ICBC adding 3 per cent to HK$6.48.

On the mainland, the Shanghai Composite also ended higher on the first trading day of the new year, advancing 1.2 per cent to 3,348.33, the highest close in more than a month. It was also the biggest daily percentage increase in more than four months.

The CSI 300 rose 1.4 per cent to 4,087.40. The Shenzhen Composite Index and the Nasdaq-style ChiNext gained 1.1 per cent and 1 per cent to settle at 1,919.2 and 1,769.67 respectively.

Combined turnover for Shanghai and Shenzhen markets increased more than 20 per cent to 445.5 billion yuan.

Shares of resources companies shone, with coal miner Yanzhou Coal Mining rose to the daily maximum of 10 per cent to 15.97 yuan, and cement maker Anhui Conch Cement improved by 9 per cent to 31.96 yuan.