Hong Kong stocks eke out gains as investors remain optimistic over US-China trade talks

Oil and gas shares lead the charge amid rising crude prices

PUBLISHED : Friday, 18 May, 2018, 6:50pm
UPDATED : Friday, 18 May, 2018, 10:20pm

Hong Kong markets closed slightly higher on Friday amid optimism of a breakthrough in US-China trade negotiations even as talks entered a second day in Washington.

“The market has stabilised and is somewhat optimistic about the outcome of the US-China trade talks that kicked off yesterday,” said Louis Wong, director at Phillip Securities (Hong Kong). 

The benchmark Hang Seng Index inched up 0.3 per cent to 31,047.91, boosted by gains in the oil and gas sector, while the Hang Seng China Enterprises Index rose 0.6 per cent to 12,355.13.

Brent crude oil prices rose to their highest level since November 2014 on Thursday to US$80.50 per barrel, although prices declined slightly to US$79.46 on Friday. 

Chinese oil giant PetroChina led the charge, jumping 6.4 per cent to HK$6.51 after announcing plans to produce 9 billion cubic metres more gas by 2020, which involves building 650 additional wells in China’s western Sichuan province. Oil services provider Anton Oilfield Services (Group) jumped 14 per cent to HK$1.39.

Morgan Stanley is of the view that investors should hold on to oil stocks, following some excellent returns by Chinese energy majors.

China Shenhua Energy, the country’s largest coal producer, surged 6.3 per cent to HK$22.00 after it revealed a 21.6 per cent rise in sales on Wednesday.

“The energy sector outperformed other sectors, led by higher oil prices,” said Wong. “But interest rates also need to be watched carefully because inflation and interest rates are both edging up. Instability in emerging markets might become a black swan that eventually disrupts the markets.”

Black swans, a term popularised by economist Nassim Nicholas Taleb, are typically extremely random and unexpected events, which create a major impact beyond the normal expectations of a situation. 

Shares in lens manufacturer Sunny Optical Technology Group lost 2 per cent to HK$147.80, while internet major Tencent Holdings gained 0.2 per cent to HK$411.00. 

During the renewed trade negotiations on Thursday, Beijing offered to cut the US-China trade deficit by some US$200 billion per year, according to media reports.

Chinese state media, however, dismissed the news as “pure fantasy and rumours” on Friday, via a social media account of Communist tabloid mouthpiece People’s Daily.

China has previously stated that it would refuse to back down on trade concessions multiple times, in the face of combative rhetoric from Donald Trump.

Trump said on Thursday that China and the European Union had become “very spoiled” on trade, adding that the US had been “ripped off” by China for years in trade.

The US’ trade deficit with China stood at US$375.2 billion in 2017, according to US government figures. 

Chinese Vice-Premier Liu He, Beijing’s top economic official, is in Washington to meet with a high-level negotiating team from the Trump administration, including US Treasury Secretary Steven Mnuchin and senior White House trade adviser Peter Navarro, who is known to be hawkish on China issues. 

Mainland China stocks also showed gains due to investors’ renewed optimism over the ongoing trade negotiations.

The CSI 300 Index rose 1 per cent to 3,903.06, while the Shanghai Composite Index gained 1.2 per cent to 3,193.30. The Shenzhen Composite Index increased 0.3 per cent to 1,828.78, and the Nasdaq-style ChiNext Price Index added 0.3 per cent to 1,836.75.