Oil rally helps lift Hong Kong stocks, but trade concerns linger

Imminent roll-out of Chinese Depositary Receipts programme rules propelled mainland Shanghai stocks, which outperformed other Asian markets

PUBLISHED : Monday, 07 May, 2018, 9:16am
UPDATED : Monday, 07 May, 2018, 10:18pm

Hong Kong stocks closed a choppy session in the black on Monday, as gains in oil stocks, prompted by soaring crude prices, outweighed ongoing concerns that little progress had been made in trade talks between the US and China.

The Hang Seng Index swung between gains and losses, before ending up 0.2 per cent, or 67.76 points, at 29,994.26. The Hang Seng China Enterprises Index, known as the H-shares index, rose 0.6 per cent, or 75.79 points, to 11,966.41.

CNOOC, China’s largest offshore oil producer, jumped 3.1 per cent to HK$13.46 (US$1.71), the biggest contributor to gains on the Hang Seng Index, lifting the benchmark 23 points. PetroChina and Sinopec rose 2.7 per cent and 2.2 per cent to HK$5.71 and HK$7.66 respectively.

Fuelling the gains was a rally in crude prices on Monday. The US crude benchmark WTI climbed above US$70 a barrel for the first time since 2014, amid expectations US President Donald Trump will pull out of the 2015 Iran nuclear agreement which allows the Middle East country to export more crude.

Internet giant Tencent Holdings fell to a five-month low of HK$380, however, down 0.73 per cent from the previous day, dragging heavily on the Hang Seng Index, pulling it lower 20 points.

Lenovo Group, which will be kicked out from the Hang Seng Index starting June 4, tumbled 3.2 per cent to HK$3.6. CSPC Pharmaceutical, which will replace Lenovo, surged 5.9 per cent to HK$21.5.

Chinese computer maker Lenovo Group kicked out of Hang Seng Index, again

“Hong Kong market had a bad beginning to May, which is traditionally not a good month for financial market traders,” said Stanley Chik, research director at Bright Smart Securities.

“The US-China trade talks have yielded no concrete results, and the threat of a trade war is still hanging over investors.”

Investor appetite for hot technology stocks has also shrunk, he added, reflected in the disappointing share performances of both Tencent and the newly-listed Ping An Good Doctor.

Ping An Good Doctor, formally known as Ping An Healthcare and Technology Company, dropped below its IPO price on its second day of trading on Monday, closing down 3.7 per cent at HK$52.75.

Its US$1.1 billion IPO had previously received a retail oversubscription of 653 times, the most for a main offering since 2009.

A key factor [to the Hong Kong market’s performance] will be Tencent’s quarterly results next week
Stanley Chik, research director at Bright Smart Securities

“A key factor [to the Hong Kong market’s performance] will be Tencent’s quarterly results next week,” Chik added.

The US and China held two days of trade discussions in Beijing at the end of last week, but there was no public signs of any deal being reached, nor did either side brief the media.

On the mainland, the Shanghai Composite advanced 1.5 per cent to close at 3,136.63, the best performer among main Asian equity indexes.

Gains came after the Chinese regulator published draft rules of the Chinese Depositary Receipts (CDR) programme, fuelling expectations the scheme could launch in the near future, making it easier for overseas-listed Chinese technology companies to return home to launch initial public offerings.

Brokerage firms gained broadly.

China’s top beer makers lift prices in tandem for the first time in a decade

Sealand Securities climbed 2.7 per cent to 4.23 yuan (66 US cents). Guotai Junan Securities rise 1.4 per cent to 18.03 yuan. China Galaxy Securities ended up 1.1 per cent to 10.54 yuan。

Beer makers also advanced, after reports said Tsingtao Brewery, the country’s second largest brewer, has lifted prices for some of its product lines nationwide, for the second time this year.

Tsingtao soared 10 per cent to 47.25 yuan, and Beijing Yanjing Brewery pulled higher by 9 per cent to 7.86 yuan.