Hong Kong stocks in three week rally on upbeat corporate earnings, Stock Connect optimism

Hong Kong stocks pulled back on Friday after touching a nine-month high in the previous session, but still notched up a third straight week of gains, buoyed by a flurry of upbeat earnings and the approval of the long-awaited Shenzhen-Hong Kong Stock Connect earlier this week.

The Hang Seng Index finished down 0.4 per cent or 85.94 points at 22,937.22. For the week, the index snagged a 0.8 per cent gain, extending its winning streak to a third straight week.

On the same day, the Hang Seng China Enterprises Index, or the H-shares index, dropped 0.5 per cent or 48.52 points to close at 9,606.17.

Turnover decreased to approximately HK$77 billion against Thursday’s HK$93 billion.

Mainland Chinese stocks also advanced for a second week in a row.

On Friday, the benchmark Shanghai Composite Index ticked up 0.1 per cent or 3.99 points to settle at 3,108.1. For the week, the index rose 1.9 per cent, adding to a 2.5 per cent gain in the previous week.

The large-cap CSI300 was little changed at 3,365.02. The Shenzhen Composite Index inched up 0.1 per cent or 2.47 points to 2,044.7. The Nasdaq-style ChiNext Index also ended 0.1 per cent or 2.96 points higher at 2,204.56.

Combined turnover for Shanghai and Shenzhen markets dropped to 537 billion yuan, down from Thursday’s 635 billion yuan.

“The stock market has recently received a boost from the approval of the Shenzhen-Hong Kong Stock Connect,” said Ben Kwong Man-bun, executive director of KGI Asia.

Late Tuesday, China gave the green light to the long-awaited Shenzhen-Hong Kong Stock Connect scheme, which will allow investors in both cities to buy or sell stocks in each other’s market through brokers. Officials from the Hong Kong Exchanges & Clearing expected the stock trading link to be operational by Christmas.

Also supporting the gains in stock markets were a flurry of upbeat corporate earnings released recently and expectations that the Federal Reserve may be unlikely to tighten monetary policy anytime soon, according to analysts.

“It seems the Fed is split on whether to raise the interest rate in the near term. That has helped lift the market sentiment,” said KGI analysts in a note on Friday.

Several corporate heavyweights have unveiled their half-year results this week.

Telecom giant China Telecom jumped 3.4 per cent to HK$9.36, following a 7.7 per cent surge in the previous day. The company recently reported a less-than-expected drop in its half-year net profit, which amounted to 1.4 billion yuan. Wang Xiaochu, chairman of China Telecom, expected the company’s performance to improve in the second half of the year.

Online major Tencent Holdings edged down 0.2 per cent to HK$202.6, after jumping more than 5 per cent on Thursday. Earlier this week, Tencent said its half-year net profit increased 47 per cent from the same period a year earlier, beating market estimates.

Geely Automobile surged 4.7 per cent to close at HK$5.81, after the auto maker posted a 31 per cent year-on-year increase in net income for the first half of the year.

However, casino operators fell broadly after Daiwa Securities cut the outlook of Macau’s casino industry to negative and lowered their revenue forecast for this year. Wynn Macau slid 5.7 per cent to HK$11.6, Sands China fell 4.1 per cent to HK$30.5, and MGM China lost 2.8 per cent to HK$11.6.

Chinese coal miners were also weaker. China Shenhua Energy fell 4.3 per cent to HK$13.76 in Hong Kong. Its Shanghai-listed stock lost 0.5 per cent to 15.07 yuan. Yanzhou Coal Mining’s H shares tumbled 4.8 per cent to HK$4.39. Its A shares also declined 1.4 per cent to 12.4 yuan.