Hong Kong and mainland shares advance, property stocks higher on upbeat housing data

Hong Kong and Chinese stocks finished the week on a high note, following upbeat mainland housing data and comments by Europe’s central banking chief hinting at further monetary stimulus.

Shanghai and Shenzhen benchmark indices rose 1.3 per cent to 3,412.43 and 2.94 per cent to 2,016.74 respectively while Hong Kong’s Hang Seng index gained 1.34 per cent to 23,151.94.

Property stocks were standouts on both sides of the Hong Kong border after newly-released housing data showed new home prices rose for a fifth month in a row in September. Prices increased in 39 mainland cities last month, compared to 35 in August, while the number of cities experiencing price drops declined.

“There has been quite a rebound from the third quarter as individual [company] news is boosting sentiment,” said VC Brokerage director Louis Tse Ming-kwong.

In an announcement after the close of markets Friday, the People’s Bank of China said it cut the one-year benchmark bank lending rate 25 basis points and lowered bank’s reserve requirement ratio by 50 basis points, with the changes to take effect from Saturday.

China’s largest developer by sales, China Vanke, rose 2.94 per cent in Hong Kong to HK$18.18. Local developer Sun Hung Kai Properties rose 2.20 per cent to HK$106.7 and Henderson Land gained 2.71 per cent to HK$51.25.

China’s outstanding loans to new home buyers and property developers surged 20.9 per cent in September as buyers returned in spite of a worrying overhang of unsold inventory in China’s smaller cities. Many new buyers were drawn in by softer credit conditions, as the mortgage lending rate has been halved during the past year thanks to a succession of interest rate cuts.

Banks extended 1.92 trillion yuan worth of mortgages for the first nine months of the year, up from 596.1 billion yuan a year earlier, according to data provided by China’s central bank.

Stocks also got a shot in arm from indications European authorities may opt for additional quantitative easing to shore up the economy.

European Central Bank President Mario Draghi said the policy board would review all its options for monetary stimulus and that council members had already discussed further cuts to deposit rates.

Jason Song, a strategist with Guotai Junan International, said the encouraging words from ECB officials had contributed to a “risk on” sentiment in Hong Kong.

“The dovish stance from the European Central Bank has made the chance even lower for a rate hike in the near term by the Fed, leading to more capital returning or staying in emerging markets,” Song said.

Shares in China Southern Airlines and Air China nosed down 4.2 per cent in China and Hong Kong after both companies played down rumours of a merger.

In other action, China’s pharmaceutical sector extended its recent run of daily gains as Chinese media reported health care ranks high on the agenda of the leadership for the fifth party plenum, which kicks off Monday.

Medical ecommerce firm Searainbow was the top performer, rising a limit-up 10 per cent to 34.58 yuan while drugmaker Guangxi Wuzhou Zhongheng gained 9.93 per cent to 6.64 yuan.

Distressed debt manager China Huarong Asset Management raised HK$17.8 billion through its initial public offering though shares will be priced towards the lower end of an indicative range, Reuters publication IFR reported citing sources close to the deal.

VC Brokerage’s Tse said there were many IPOs at the moment, which was making it difficult for new markets entrants to raise cash.

Investment bank China International Capital Corp plans to raise up to HK$ 6.28 billion in its IPO, around 20 per cent less than originally thought, and the firm will price between HK$ 9.12 and HK$10.28 per share. according to reports.