Hong Kong stocks rip higher for a sixth straight session on upbeat growth and earnings outlook

The Hang Seng Index continued its record crushing rise on Tuesday, as Wynn Macau reported a 285 per cent jump in quarterly profit and the IMF raised its global outlook

PUBLISHED : Tuesday, 23 January, 2018, 9:11am
UPDATED : Tuesday, 23 January, 2018, 10:18pm

Hong Kong stocks rose to an all-time high for a sixth straight day on Tuesday, as mainland investors increased buying through the connect programmes on optimism about the outlook of global growth and corporate earnings.

The Hang Seng Index climbed 1.7 per cent, or 537.29 points, to 32,930.70 at the close. The Hang Seng China Enterprises Index, or the H-share gauge, added 2.2 per cent, rising for 18 days in a row. Shares worth HK$198 billion (US$25.3 billion) changed hands on the exchange’s main board, the most since July 2015. Mainland China’s equity benchmark rose to its highest level in two years as banks rallied.

Average daily buying of Hong Kong stocks by mainland investors reached 3.9 billion yuan (US$608.9 million) this month, more than double the average for the full year in 2017, Bloomberg data showed. The optimistic sentiment was boosted after the International Monetary Fund on Monday raised its forecasts for world economic growth in both 2018 and 2019 and casino operator Wynn Macau reported a nearly threefold jump in quarterly profit.

“Wynn results, and the IMF’s upward revision to global growth is supportive of the earnings outlook,” said Stanley Chan, director of research at Emperor Securities. “The Hong Kong market faces some short-term correction pressure but it is unlikely to see a major turnaround.”

The 14-day relative strength gauge of the Hang Seng Index rose to 88.3 on Tuesday, above the 70 threshold indicating the stocks are overbought and poised to fall.

Wynn Macau jumped 6.2 per cent to HK$29.30. The casino operator said fourth-quarter profit surged 285 per cent from a year earlier to US$179.2 million.

Main rivals Galaxy Entertainment Group gained 1.7 per cent to HK$67.05 and Sands China rose 1.4 per cent to HK$48.55.

Financial companies contributed the most to the gain on the benchmark gauge on Tuesday. Agricultural Bank of China rallied 4.3 per cent to HK$4.61 and China Construction Bank added 4.4 per cent to HK$8.77.

Tencent Holdings rallied 3.2 per cent to HK$474.6 amid a global rally in technology stocks. Netflix, the world’s largest online TV network, jumped over 8 per cent on Monday in New York, joining the US$100 billion market capitalisation club after strong earnings.

Shimao Property Holdings advanced 5 per cent to HK$25.20 after the developer said net income may have risen at least 40 per cent from a year earlier in 2017.

BAIC Motor climbed 4.3 per cent to HK$11.68 after Credit Suisse raised the stock’s target price to HK$13.70 with an outperform rating. The Chinese carmaker announced a disposal of an 8.15 per cent interest in Beijing Electric Vehicle to its affiliate Chengdu Qian Feng Electronics.

The IMF estimated 3.9 per cent growth for the global economy in both 2018 and 2019, a 0.2 percentage point increase from its last forecast in October, saying sweeping US tax cuts were likely to boost investment in the world’s largest economy and help its main trading partners.

The mainland’s Shanghai Composite Index advanced 1.3 per cent, or 45.14 points, to 3,546.51, the highest close since December 30, 2015. The CSI 300 Index of big-cap shares added 1.1 per cent.

Traders snapped up banks on expectations their valuations will catch up with the rest of the market amid China’s stabilising economic growth.

The 21 banks on the Shanghai exchange are valued at 8.3 times the projected earnings for the following 12 months, the lowest among all the industries, according to Bloomberg data. The multiple for the Shanghai Composite is 14 times.

China Construction Bank, the nation’s second largest by assets, surged 8.3 per cent to 9.81 yuan in Shanghai, the highest close in a decade. Bank of China, the fourth biggest bank in China, jumped 6.4 per cent to 4.68 yuan, also at a 10-year high. Bank of Communications gained 4.7 per cent to 6.98 yuan and Industrial & Commercial Bank of China climbed 4.5 per cent to 7.49 yuan.