Financial stocks advance in Hong Kong as Bond Connect opens for business

Financial stocks advanced in Hong Kong on Monday after the new Bond Connect programme opened mainland China’s bond market to global investors.

The banking and brokerage sectors, the direct beneficiaries of the connect programme, rose 0.8 per cent and 0.5 per cent respectively on Monday.

“Bond Connect ensures full accessibility to China’s 67.6 trillion yuan (US$10 trillion) fixed income market,” said Deutsche Bank strategist Jiang Hongtao. “We expect investment inflows via the Bond Connect to be modest initially and reiterate our view of US$700-800 billion bond market inflows over the next five years.”

HSBC and an asset management unit of Bank of China said they have completed their first trades under the scheme. HSBC gained 1.3 per cent to HK$73.6 and Bank of China Hong Kong added 1.5 per cent to close at HK$37.9. Agricultural Bank of China and Bank of Communications rose 1.4 per cent and 0.9 per cent to close at HK$3.7 and HK$5.6 respectively.

Among brokerages, Orient Securities International was the biggest gainer, up 5.6 per cent to HK$1.0, while Huatai Securities added 1.9 per cent HK$15.3.

China property developers also outperformed on Monday after property consultant China Real Estate Information Corporation (CRIC)released data on Friday showing that most developers have reached 50 per cent of their yearly targets in the first half.

Greentown China Holdings surged 15 per cent to HK$9.9 while China Evergrande Group gained 9.1 per cent to HK$15.3.

However, Hong Kong’s overall stock market largely remained flat on the first trading day of the third quarter. The Hang Seng Index gained 19.6 points, or 0.08 per cent, to 25,784.2, while the Hang Seng China Enterprises Index added 47.3 points, or 0.5 per cent, to 10,412.5.

Macau casinos led the losses on Monday after the enclave announced its gaming revenue rose less than expected in June. Gaming revenue rose 26.9 per cent year on year in June to 19.9 billion patacas (US$2.5 billion), lower than a median estimate of 30 per cent growth in a Bloomberg survey.

Galaxy Entertainment Group led the losses among the 50 HSI constituent stocks, down 2.2 per cent to HK$46.4, while Sands China dropped 1.3 per cent to close at HK$35.3.

On the Chinese mainland, stocks ended mixed on Monday. The Shanghai Composite Index was up 0.1 per cent to close at 3,195.9 while the CSI 300 dropped 0.4 per cent to close at 3,650.9. The Shenzhen Component Index added 5.4 points or 0.05 per cent to 10,535.1. The ChiNext gauge of smaller firms gained 1 per cent or 17.9 points to 1,836.

The China Caixin manufacturing PMI for June stood at 50.4, better than the 49.8 estimated by economists and the 49.6 figure from a month earlier. The official manufacturing PMI, announced on Friday, also recorded a better than expected performance.