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Stocks rally after Goldman Sachs raises China forecasts; bank, property sectors shine

Hang Seng at two-week high 23,829.67. Factors in China’s favour, says investment giant, are ‘notable rise’ in economic growth and hot southbound and warm foreign capital flows

PUBLISHED : Monday, 13 March, 2017, 9:16am
UPDATED : Monday, 13 March, 2017, 10:58pm

Hong Kong’s Hang Seng Index closed Monday at its best level in two weeks, boosted by strong gains in Chinese banks and real estate developers, after Goldman Sachs predicted Chinese equities to outperform other regional peers and upgraded its ratings on banking and property sectors.

The Hang Seng Index rose for a second session in a row and closed up 1.1 per cent or 261 points at 23,829.67, the highest close since the end of February.

The Hang Seng China Enterprises Index, which tracks the performance of Hong Kong-listed mainland Chinese companies, advanced 1.9 per cent to close at 10,258.71.

Chinese banks and property developers were the best performing sectors, registering a 1.5 per cent and 1.3 per cent gain respectively.

The rallies came after Goldman Sachs issued a report upgrading its rating on Chinese equities to “Overweight”, favouring banks and property shares in particular.

“Most notably, we upgrade China to “Overweight”, largely because there are several China-specific factors that may help drive outperformance in coming quarters, ” said Timothy Moe, Goldman’s chief Asia-Pacific strategist, and his team in the report.

These factors include “a notable rise” in China’s economic growth, which could reach 11 per cent year-on-year nominally in the first quarter , supportive policy to ensure “stability” in the lead-up to the 19th Communist Party Congress in the fourth quarter, as well as hot southbound flows and warm foreign flows, the analysts added.

The Hong Kong market was up partially because the city has already digested the news of the US rate hike. Investors are well prepared for the issue as it has been the market focus for about two months
Victor Au, the chief operating officer at Delta Asia Securities

In particular, Goldman Sachs upgraded Chinese banks to “Overweight” and also raised its rating on Chinese property shares to “Marketweight”.

In the meantime, most analysts believed Hong Kong investors have priced in the probability of a Fed rate increase later this week.

“The Hong Kong market was up partially because the city has already digested the news of the US rate hike,” said Victor Au, the chief operating officer at Delta Asia Securities.

“Investors are well prepared for the issue as it has been the market focus for about two months.”

China Construction Bank, Bank of China, and ICBC all jumped more than 3 per cent, closing at HK$6.25, HK$3.9, and HK$5.06 respectively. China Agricultural Bank gained 2.9 per cent to HK$3.59.

China Resources Land, a Hang Seng Index component, climbed 3.4 per cent to HK$21.4. China Vanke, the country’s largest residential developer, also rose 3.1 per cent to HK$21.95. China Overseas Land & Investment ended up 2.3 per cent at HK$24.6.

Sino-British banking giant HSBC advanced 2.1 per cent to HK$64.35, after it named Mark Tucker, the chief executive of AIA Group, as HSBC’s next chairman. In contrast, AIA slid 3 per cent to finish at HK$48.8.

In the mainland, the Shanghai Composite Index rose 0.8 per cent or 24.26 points to close at 3,237.02. The CSI 300 Index was up 0.9 per cent at 3,458.1.

The Shenzhen Component Index gained 1 per cent at 10,559.88. The Nasdaq-like ChiNext settled 0.8 per cent higher at 2,029.89.

Resource shares outperformed, with coal miner Shaanxi Coal Industry up 3.7 per cent to 5.85 yuan, copper producer Jiangxi Copper up 3.4 per cent to 18.93 yuan, and steel maker Angang Steel Company higher by 2.5 per cent to 5.86 yuan.

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