Hong Kong stocks rise on better Hang Seng Bank, HSBC earnings

The benchmark is up 143.24 points, halting a five-day decline

PUBLISHED : Monday, 06 August, 2018, 7:04pm
UPDATED : Monday, 06 August, 2018, 7:04pm

Hong Kong shares closed higher on Monday as gains in Hang Seng Bank and HSBC offset losses of gaming stocks. Traders however said the rebound was capped by cautious sentiments due to the ongoing US-China trade war and the mainland’s large cap benchmark CSI 300 closing at a 22-month low.

The Hang Seng Index rose 0.5 per cent, or 143.24 points, at 27,6819.56, halting a five-day decline, and the Hang Seng China Enterprises Index edged up 0.1 per cent, or 8.17 points, to 10,701.96.

“The benchmark is likely to face strong resistance at the 28,500 level,” said Stanley Chan, director of research at Emperor Securities. “The yuan’s rebound wasn’t strong enough and people are worried about the poor Chinese economic data this week.”

China’s yuan dropped 0.28 per cent on Monday to trade at 6.8462 per dollar, erasing all of Friday’s increase when the central bank raised the risk reserve requirement to 20 per cent from zero for financial institutions conducting onshore yuan forwards business on behalf of customers, and thereby making it more expensive to short the currency.

The yuan’s drop on Monday suggested that the action of the People’s Bank of China’s is likely to inject some near-term stability in the currency, but it would not change the long term bias for yuan weakness, said Heng Koon How, head of markets strategy at United Overseas Bank.

The benchmark is likely to face strong resistance at the 28,500 level
Stanley Chan, Emperor Securities

The nation is due to release July foreign exchange reserves, trade and inflation figures this week.

In Hong Kong, Hang Seng Bank, the city’s biggest bank, jumped 1.6 per cent to HK$205.60 after reporting a better-than-expected increase in first-half net profit, which rose by 29 per cent thanks to higher interest and fee incomes.

Its parent HSBC added 0.5 per cent to HK$72.65, after posting a 5 per cent rise in first-half profit, in line with expectations.

Internet giant Tencent Holdings and Apple supplier AAC Technologies Holdings also rose 0.9 per cent to HK$353 and HK$95.35 respectively. AAC extended its gains after Apple became the first US publicly-traded company to hit US$1 trillion in market valuation on Thursday.

But gaming stocks fared poorly. Melco International Development dropped 2.3 per cent to HK$21.55, MGM China Holdings lost 3.7 per cent to HK$16.04 and Wynn Macau was 2 per cent lower at HK$19.60.

Geely Automobile Holdings also dropped 2.4 per cent to HK$16.18.

Mainland stocks continued to slip. The CSI 300 Index – which tracks the large caps listed in Shanghai and Shenzhen – fell 1.3 per cent, or 42.01 points, to 3,273.27, marking the lowest closing level since September 30, 2016. The Shanghai Composite Index fell 1.3 per cent, or 35.29 points, to 2,705.16.

The Shenzhen Composite Index slumped 2.1 per cent, or 30.97 points, to 1,455.09 while the Nasdaq style ChiNext eased 2.8 per cent, or 40.81 points, to 1,440.80.

The stock markets continued to be marred by the escalating trade spat between the US and China, with the mainland announcing retaliatory tariffs of 5 to 25 per cent on US$60 billion of US imports after the Trump administration said it was considering increasing duties from 10 per cent to 25 per cent on US$200 billion of Chinese imports.

Raising the stakes in equivalent retaliation could be a common strategy that both sides were using to stop the other party, said JPMorgan’s chief China economist and China equity strategy head Haibin Zhu.

Zhu said while China was willing to cooperate by opening up its markets and increasing imports, it was reluctant to commit to a specific timetable or numerical targets, let alone give up its industrial policies as the US has requested.

“Negotiations, even if resumed, is likely to involve a bumpy and lengthy process,” he said.