China flows help Hong Kong shares extend gains
HONG KONG (NewsRise) -- Hong Kong stocks extended gains from 19-month highs on upbeat investor sentiment after the U.S. Federal Reserve maintained its outlook for gradual rate increases and buoyant flows from across the Chinese border.
The Hang Seng Index rose 0.3% to 24,354.89 Friday morning, after a tentative start that saw the gauge briefly dipping into the red. China Unicom Hong Kong gained 1.8% to near its highest level since October 2015 on optimism the company's plans to slash capital expenditures this year would improve its cash balances after a sharp 2016 profit decline. Cathay Pacific Airways rose for the first time in three days on media reports the airline plans to cut staff costs by 30% at its Hong Kong headquarters after swinging to a loss last year.
Friday's index gain adds to the 50-stock benchmark's rise Thursday, its steepest advance since May, in the wake of the Fed's decision to raise borrowing costs by 0.25 percentage points and leave unchanged projections for two more hikes this year. While U.S. equities retreated overnight after a rally Wednesday following the Fed's decision, they remain close to all-time highs.
Turnover on the Hong Kong bourse's main board reached HK$58.60 billion ($7.5 billion) Friday morning, already more than half the daily total for Thursday when volumes hit a one-month high. Transactions by mainland investors over the exchange's links with the Shanghai and Shenzhen markets contributed about HK$5.6 billion of morning trading.
"It seems to me there is a lot of inflow from the mainland, with retail investors or funds coming in and buying through the Stock Connects," said Andrew Clarke, a Hong Kong-based director for trading at Mirabaud Asia. "The Fed sticking up interest rates is a signal that the economy in the U.S. is actually quite robust, although there are plenty of people looking at the U.S. and saying the market there is massively overbought."
The Hang Seng China Enterprises Index of large mainland companies listed in the city added 0.2% while the Shanghai Composite Index fell 0.2%. A gauge measuring the premium for dual-listed Chinese companies' mainland shares over their Hong Kong-listed equivalents fell 0.3% to 114.84. The Hang Seng China AH Premium Index is currently trading at its lowest level since December 2014 as cheaper valuations in Hong Kong attract mainland investors.
Great Wall Motor and Geely Automobile Holdings plunged more than 8% each. Traders attributed the slump to speculation about Great Wall sales promotions on sports utility vehicles that could potentially trigger a price war in the already-popular market segment and hurt industry profits.
The Shenzhen Composite was little changed. Shenzhen-listed shares of China Vanke rose 2.2% after the developer said China Evergrande Group and affiliates have agreed to delegate rights to their more than 14% stake in Vanke to Shenzhen Metro Group for one year. The agreement helps more than double Shenzhen Metro's voting stake in Vanke to about 29.4%. Vanke shares in Hong Kong weakened 0.6%.
China Evergrande declined 2.5%. The developer separately announced plans for the issuance of U.S. dollar-denominated senior notes to refinance existing debt.
The yuan slipped less than 0.1% to 6.8995 in onshore trading against the dollar. The Nikkei Asia300 Index added 0.8% to 1,167.32.
China Railway Group was little changed at HK$7.27. The company has signed a framework agreement to invest 300 billion yuan ($43.5 billion) in infrastructure projects in Sichuan Province.
China Shenhua Energy added 2% after saying its coal sales surged almost 65% in February. The company is due to report its earnings later on Friday.
Samsonite International jumped more than 9% amid positive brokerage reports after the luggage maker reported better-than-expected results on Thursday. Shares of Alibaba Group Holding rose 1.9% to $105.63 in U.S. trading overnight. The company plans to enter into mobile game distribution with an investment of 1 billion yuan, it said in a statement.
-- V. Phani Kumar