Hong Kong stocks snap two-day drop led by A-shares, but markets remain jittery

Hong Kong shares closed higher on Tuesday, ending a two-day decline but the market remains jittery ahead of an interest rate decision by the US Federal Reserve on Wednesday.

The Hang Seng Index closed at 25,852.1, up 0.6 per cent, or 144.06 points. The Hang Seng China Enterprises Index finished 0.4 per cent higher, or 39.89 points, at 10,525.74.

Daily total market turnover reached HK$80.43 billion, down from Monday’s HK$88.27 billion.

Louis Wong Wai-kit, director of Phillip Capital Management, expects the Hong Kong benchmark to be range bound for the next few days because of the downward momentum in the US market.

“Tech shares in the US market are going through a consolidation period at the moment,” Wong said. “But the rebounded A-shares in the mainland market today has been able to give some support.”

Banks and insurers generally advanced, with Agricultural Bank of China climbing 1.1 per cent to HK$3.59, and China Construction Bank rising 0.6 per cent to HK$6.41.

Ping An was 0.5 per cent higher to HK$51.75, but China Pacific Insurance Company gave up earlier gains to end 1 per cent lower at HK$30.50,

Mainland property company Sunac was up 12.4 per cent to HK$15.380 while fellow property group Longfor was up 4.5 per cent to HK$15.420.

The gambling industry also saw solid gains with Sands China and Galaxy Entertainment surging 2.8 per cent and 2.6 per cent to HK$37.105 and HK$48.60 respectively

The city’s benchmark gauge fell 1.2 per cent on Monday for the biggest decline in almost two months as a sell-off in US technology stocks hurt sentiment on companies including Tencent Holdings and ahead of the FOMC decision on Wednesday. Fed policy makers are forecast to raise their benchmark interest rate for the second time this year.

Tencent was up 0.7 per cent to HK$272.4.

China’s statistics bureau is scheduled to release May data on industrial production, fixed-asset investment and retails sales, also on Wednesday.

Mainland markets ended broadly higher. The Shanghai Composite Index was up 0.4 per cent, or 13.86 points, to 3,153.74 while the CSI 300 was up 0.2 per cent, or 7.88 points, to 3,582.27.

The Shenzhen Component Index was up 1.04 per cent 10.224.82 while the start-up board ChiNext rose 1.1 per cent, or 20.08 points, to 1,795.63.

Meanwhile, Hong Kong’s dollar was at 7,7993 per dollar as of 4.30pm, almost unchanged from the previous closing session.

“In the past, when the Hong Kong dollar was weak, there had been some capital outflows. But we have seen the market be largely steady today even with a weak local currency and plunges in the US market, this shows that investors are still confident and there are no signs of capital outflow at the moment,” Wong said.

However, Jasper chief strategist at King International Financial said forex dynamics that had helped push Hong Kong asset prices higher in recent months have now reversed.

“China’s signal that yuan depreciation is finished means there won’t be much in the way of southbound flows to support Hong Kong stocks and property markets.” Lo said.

In other Hong Kong action, automobile companies were among the biggest gainers, rising 1.5 per cent on average.

Wuling Motors was up 11.8 per cent, while BAIC Motor was up 6.5 per cent. Great Wall Motor retreated 2.9 per cent to HK$10.70, after a 21 per cent surge on Monday.

China’s securities regulator is rejecting initial public offering applications at the fastest pace in four years while speeding up the approval process at the same time, suggesting it is aiming to improve the quality of listed companies.

Meanwhile three mainland stocks soared on their IPO debuts on Tuesday.

Shandong Huifa Foodstuff, which produces and processes frozen meat and seafood, soared by its 44 per cent allowable limit in Shanghai to 10.99 yuan from its IPO price of 7.63 yuan. Zhejiang Zomax Transmission, which makes automotive parts, jumped 44 per cent to 16.11 yuan from an IPO price of 11.19 yuan. Zhuzhou Feilu High-tech Materials, a producer of paint and coatings, was also limit up 44 per cent to per cent to 14.59 yuan.

Additional reporting by Karen Yeung, Laura He and Zhang Shidong