Hong Kong shares jump to 19-month high on Fed relief
HONG KONG (NewsRise) -- Hong Kong shares surged to their highest close since August 2015 on Thursday after the U.S. Federal Reserve refrained from increasing its projections for the number of interest-rate increases for the remainder of the year.
Posting its best advance since May, the benchmark Hang Seng Index jumped 1.9% to 24,254.07, comfortably clearing the 24,000-level above which it has struggled this year. The rally was backed by cash, with trading volume on the Hong Kong bourse's main board climbing back above the HK$100 billion ($12.9 billion) level Thursday, the highest in a month.
For investors in Hong Kong, where borrowing costs move in lock-step with U.S. rates because of the city's currency peg to the dollar, the Fed's decision to maintain its forecast for a total of three rate hikes in 2017 helped lift spirits. While the Fed's widely expected 0.25 percentage point increase in its policy rate was matched by the Hong Kong Monetary Authority early Thursday, its outlook helped ease fears of capital outflows from the region.
"With the Fed less hawkish than what the markets feared, emerging markets will be among the beneficiaries," said Ben Kwong, executive director at KGI Asia. "The Fed's unchanged forecast helps the outlook on the yuan and will be a boost for China and Hong Kong markets."
CNOOC climbed 3.6%, its steepest gain in two months, to pace energy stocks higher, as U.S. crude oil prices extended their 2.4% surge overnight, when they halted a seven-day losing streak.
China Unicom Hong Kong was the Hang Seng Index's top gainer, surging 5.2% to its highest level in almost a year, as investors appeared to appreciate the company's plan to cut its capital expenditure for 2017 by 38% after the mobile service provider reported a 94% plunge in its 2016 profit.
The Hang Seng China Enterprises index of large Chinese companies listed in Hong Kong jumped 2.5%. Over in the mainland, the Shanghai Composite advanced 0.9% to its highest level in more than three months. China's social security reserve fund will invest a "relatively low" proportion of pension funds into the nation's equities, said Lou Jiwei, Chairman of the National Council for Social Security Fund, according to a Caixin report.
The yuan traded onshore rose 0.2% to 6.8965 against the dollar, poised for its best day in almost two months. Earlier in the day, the People's Bank of China followed the Fed rate hike by increasing the interest rate it charges for providing funds in the interbank money markets by 10 basis points, amid efforts to curb financial risks and stem capital outflows.
"It is likely that the PBOC will continue cautious and phased tightening in the coming months, unless growth slows significantly and/or the ongoing financial regulatory changes have a clearer effect in dampening leverage," Goldman Sachs analysts wrote in a report.
The PBOC's move helped financial shares traded in Hong Kong, with China Life Insurance rising 3.8% and Ping An Insurance Group gaining 2.4%. Among the nation's major lenders, shares of Industrial and Commercial Bank of China (ICBC) rose 2.6% and China Construction Bank (CCB) increased 1.9%.
Bank of Communications added 2.5% in the upbeat broader market. Hong Kong's securities regulator said in a statement it has fined a subsidiary of the Chinese lender HK$15 million for failure in its due diligence related to the listing application of China Huinong Capital Group.
Swire Pacific fell 0.8%, one of the only two decliners Thursday on the Hang Seng Index, after reporting during the midday break a 28% decline in last year's net profit. Its subsidiary Swire Properties slid 1.6% even after reporting a 7% rise in its 2016 net income.
Cathay Pacific Airways, another company where Swire Pacific owns a controlling stake, was the other Hang Seng Index constituent to retreat as it lost 2.8%, adding to Wednesday's slide following a net loss last year.
Hong Kong International Construction Investment Management Group surged 26% after it outbid 14 other companies to win a tender for a residential plot in the Kai Tak area, where the city's old airport was located, for HK$7.44 billion.
Hong Kong and China Gas rose 1.3%. At the end of the day's trading, the company reported 2016 earnings that were little changed from the year earlier.
-- V. Phani Kumar and Nimesh Vora