Hong Kong, China stocks get a lift from US-China trade talks and Beijing’s call for banks to lend more

The Hang Seng Index gained 1.4 per cent while Shanghai shares added 1.1 per cent

PUBLISHED : Monday, 20 August, 2018, 7:01pm
UPDATED : Monday, 20 August, 2018, 7:21pm

Hong Kong and mainland Chinese stock markets rose on Monday ahead of a fresh round of China-US trade talks this week aimed at defusing the ongoing trade war, and as China’s banking regulator stepped up efforts to get banks to increase lending to companies.

Media reported that lower-level trade talks would take place on August 21 and 22 in Washington, just before China and the United States are scheduled to impose 25 per cent tit-for-tat tariffs on US$16 billion worth of goods on August 23.

“Hong Kong stocks had quite a good rebound today, with the benchmark pointing toward the 28,000 level,” said Kingston Lin King-ham, a director at securities brokerage AMTD. “However the market will be disappointed again if no positive announcements come out of these US-China talks.”

The Hang Seng Index gained 1.4 per cent, or 384.61 points, to 27,598.02 after sliding over 4 per cent last week in its worst weekly decline since February. The Hang Seng China Enterprises Index was up 1.1 per cent, or 118.53 points, at 10,632.36.

The Shanghai Composite Index gained 1.1 per cent, or 29.50 points, to 2,698.47, and the CSI 300 – which tracks large caps listed in Shanghai and Shenzhen – rose 1.2 per cent, or 37.63 points, to 3,267.25. The Shenzhen Composite Index added 0.6 per cent, or 8.69 points, to 1,451.07 and the Nasdaq-style ChiNext inched up 0.1 per cent, or 1.38 points, to 1,435.69.

Hong Kong blue chips and Chinese property developers got a lift after the China Banking and Insurance Regulatory Commission asked financial institutions to give more support to infrastructure investment, importers and exporters, and to creditworthy companies experiencing temporary problems.

The regulator also called on institutions to raise the proportion of medium- and long-term loans to avoid placing strain on borrowers at the end of a month or quarter.

Tencent Holdings bounced 4.1 per cent to HK$350.80, becoming the best-performing blue chip and adding 105 points to the benchmark index. The internet giant however remains 26 per cent lower than its January peak, and is technically still trading in bear territory.

Among property developers, China Evergrande Group jumped 4.5 per cent to HK$28, China Resources Land advanced 4 per cent to HK$27.35 and Sunac China Holdings gained 3.3 per cent to HK$23.85. Country Garden Holdings was 2.2 per cent higher at HK$11.34.

Elsewhere, Lenovo Group rose 3.7 per cent to HK$5.08 after Bank of America Merrill Lynch lifted the Chinese personal computer maker to a buy rating and raised its target price to HK$5.90 from HK$3.20, citing narrowing losses in the company’s mobile and server businesses.

Gaming stocks rose. Wynn Macau surged 8.9 per cent to HK$20.15 after the firm declared a special dividend of 75 HK cents, equivalent to a 130 per cent payout ratio and beating forecasts. Galaxy Entertainment Group rose in tandem, up 2.7 per cent to HK$54.95 and Sands China increased 2.9 per cent to HK$37.15.

China Mobile rose 2.1 per cent to HK$74.80 after the firm said it had added a net 6.498 million 4G customers in July.

In the currency market, onshore yuan, traded on the mainland, rose for a third straight session to 6.8536 against the US dollar, helping stabilise sentiment.

However, given that the chance remained for an escalation of the trade war, Chinese authorities were likely to lower interest rates to cushion against potential adverse impacts, and to close capital outflow loopholes to allow for a weaker yuan, according to ING Bank’s Greater China economist, Iris Pang.

“The economy needs lower interest rates to support investment and economic growth in this ongoing trade spat,” Pang said.