May 15, 2017 8:08 pm JST

China flows propel Hong Kong shares to new 21-month highs

HONG KONG (Nikkei Markets) -- Hong Kong shares rose to fresh 21-month highs Monday, spurred by continued inflows from the mainland and a rally in energy producers.

The Hang Seng Index rose 0.9% to 25,371.59 in a financial stocks-led advance that kept the gauge at its highest levels since July 2015. A popular index of mainland stocks traded in Hong Kong climbed 1.6% to a seven-week high, while the Shanghai Composite added 0.2%. Recent efforts by Chinese regulators to contain financial risks have raised concerns about liquidity, causing equities to lag behind Hong Kong's benchmark gauge and the Hang Seng China Enterprises Index. The Shanghai Composite has shed 2% in the last fortnight compared with a more than 2% advance for the H-share index.

"While we have seen a decent correction in China markets on account of the recent measures to deleverage the economy, it has had not much of an impact on the H-shares," said Banny Lam, head of research at Hong Kong-based CEB International Investment. "To my mind, the policy uncertainty in China and the recent declines in A-shares are in a way helping drive flows from China into Hong Kong."

Mainland investors purchased more than a net HK$2.3 billion ($295.4 million) of Hong Kong stocks via the Shanghai and Shenzhen stock connects on Monday, stock exchange data show.

Ping An Insurance Group rose 1.6% after accumulated gross premium for its life insurance business jumped more than 40% for the January-to- April period. Bank of China (BOC) added 2.4% to lead banking stocks higher, after new loans made by Chinese lenders in April exceeded expectations. China Petroleum & Chemical (Sinopec) climbed 3.2% after Brent crude prices rose to a two-week high. AAC Technologies Holdings fell for a third consecutive day after short-seller Gotham City Research raised questions about its accounting practices. The stock slid 4.4% to near two-month lows.

Bank of Communications advanced 0.9% to HK$5.95 amid gains by Chinese lenders. The state-owned bank said the final offer price for its unit BOCOM International Holdings's initial public offering was set at HK$2.68 per share, near the lower end of its price rage. Trading is expected to start on May 19.

Television Broadcasts slumped 4.4% to HK$28.60 as trading resumed after a two-week suspension. The drop came as TVB said there was no certainty that a previously-announced buyback offer will proceed while the company considers the legal implications of a ruling by the Takeovers and Mergers Panel on the offer, which would boost Young Lion Holdings's stake in the broadcaster. In January, TVB made an offer to buy back 138 million shares at HK$4.21 per share and said it will seek an exemption for a mandatory offer by Young Lion.

China Shanshui Cement has failed to make interest payments on a medium term note due May 12, according to a note posted on the Shanghai Clearing House's official website. The shares have been on a trading halt for over two years.

Sunac China Holdings declined 0.6% after saying its unit will acquire an 80% debt and equity interest in Tianjin Xingyao for 10.25 billion yuan ($1.5 billion).

China Resources Cement rose 2.6% after saying it expects profit attributable to owners to "significantly increase" during the six months ending June 30.

Genscript Biotech rallied 19% after saying its unit Nanjing Legend was invited by the American Society of Gene and Cell Therapy to present results of a technology being tested for cancer treatment. The company said the technology has "the potential to bring curing solutions" to patients under a "safe and effective treatment."

Cosmo Lady China Holdings jumped 10% after saying it had entered a strategic cooperation pact with Japan's Kimuratan and Qingdao Dadu International Trade for marketing and distribution of children's apparel under certain Kimuratan flagship brands in China.

Pou Sheng International Holdings, a subsidiary of Pou Chen, the world's largest branded athletic and casual footwear manufacturer, slumped 16% after the sportswear retailer said net profit fell more than 27% in the March quarter.

SouthGobi Resources fell 5.6% after it reported a net loss of $9.6 million for the March quarter.

The Nikkei Asia300 Index, which measures more than 300 companies in the region, rose 0.5%.

-- Nimesh Vora and V.Phani Kumar

--Nikkei Markets is a real-time financial news service for South East Asia's markets published by Nikkei NewsRise Asia Pte Ltd, a Nikkei and NewsRise joint venture company. Nikkei Markets provides wide companies coverage in the region, including the Nikkei's Asia300 companies.

Asia300

Ping An Insurance (Group) Co. of China Ltd.

China

Market(Ticker): HKG(2318)
Sector:
Industry:
Finance
Multi-Line Insurance
Market cap(USD): 129,646.13M
Shares: 18,280.24M
Asia300

Bank of China Ltd.

China

Market(Ticker): HKG(3988)
Sector:
Industry:
Finance
Major Banks
Market cap(USD): 153,875.85M
Shares: 294,387.78M
Asia300

China Petroleum & Chemical Corp.

China

Market(Ticker): HKG(386)
Sector:
Industry:
Energy Minerals
Integrated Oil
Market cap(USD): 102,534.95M
Shares: 121,071.20M

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