Hong Kong stocks withstand China equity selloff to advance for sixth day
HONG KONG (Nikkei Markets) -- Hong Kong stocks headed for a sixth straight advance on Monday as upbeat Chinese economic data and positive cues from the U.S. helped the market withstand a sharp and sudden selloff in mainland equities.
The Hang Seng Index rose 0.6% to 26,542 by noon, while a gauge of large Chinese companies in the city added 1.1%. Both gauges pared their early advances as benchmark Chinese equity indexes plunged in early trading before cutting some losses. Ping An Insurance Group gained 3.5% and heavyweight Tencent Holdings 0.6%, among the biggest drivers of the Hang Seng Index's point gains.
The Shenzhen Composite sank more than 4.5% while the Shanghai Composite gave up in excess of 2.5% Monday amid concern about Chinese political developments over the weekend and worries initial public offerings in the mainland may boost supply of shares, according to Louis Tse, a director at VC Brokerage in Hong Kong. The Shenzhen equity gauge - whose constituents include several so-called new-economy companies in the technology and healthcare sectors - was down 2.2% at the midday break, while its Shanghai counterpart recovered to trade 0.1% lower.
The day's market moves follow news that China's anti-corruption body is investigating Sun Zhengcai, a member of the ruling Communist Party's 25-person Politburo, and that Sun was stripped on Saturday of his role as party chief overseeing Chongqing city in southwestern China. While charges were not officially disclosed, it is the first time a sitting member of the influential Politburo has been ensnared by President Xi Jinping's sweeping anti-graft campaign. The change comes before the party's once-in-five-years Party Congress this fall.
Meanwhile, the China Securities Regulatory Commission approved a total of nine IPOs in Shanghai and Shenzhen that will raise a combined 4.2 billion yuan ($620 million). The Shenzhen and Shanghai bourses topped global stock exchanges in the first half of this year with at least 120 IPOs each, according to Ernst & Young.
"If there are a lot of IPOs, investors try to sell the old ones and go to the new ones," Tse said, adding that as supply rises, "there is no impetus for investors going in."
The political developments also had a hand in turning investors cautious, he said. "I won't say people are scared, but they are a bit worried that something not good for China financial markets may be coming up."
The day's equity gains in Hong Kong were supported by benign U.S. inflation data released Friday, which strengthened expectations that the Federal Reserve may take longer than previously expected in tightening its monetary policies.
Furthermore, official data released Monday showed China's economy grew at a faster-than-expected rate of 6.9% in the second quarter, beating estimates for a 6.8% expansion in a Nikkei survey of economists. Separately, retail sales in Asia's largest economy rose 11% last month, while industrial output increased 7.6%. Both figures came in ahead of estimates compiled by Reuters.
China Life Insurance was among the best performers on the Hang Seng Index as well as the H-share gauge, adding 4% after reporting an 18% increase in accumulated premium income for the first half.
New China Life Insurance jumped 7.1%. The insurer reported a gross premium income of 61.2 billion yuan ($9.1 billion) for the six months ended June 30.
Media company Next Digital said during Monday's trading break that it has accepted a HK$500 million ($64 million) indicative offer from W Bros. Investments for the possible disposal of its business interests in certain publications, including Next Magazine. The offer comprises HK$320 million payable to the company, and HK$180 million to be injected into the magazine businesses. Trading in the company's shares, which surged 16% on Friday, was halted Monday morning before the announcement.
Cheung Kong Property Holdings edged 0.1% lower. The developer, controlled by Hong Kong's richest man Li Ka-shing, said it'll change its name to CK Asset Holdings to reflect its focus on infrastructure investment and aircraft leasing. Separately, the company said it will sell 25% of a Canadian building-equipment services unit to its affiliate CK Infrastructure Holdings for 714.92 million Canadian dollars ($565 million). CK Infrastructure also slipped 0.1%.
Great Wall Motor lost 1.5%. China's largest seller of sports-utility vehicles said it obtained a 25% equity interest in electric carmaker Hebei Yogomo Motors via a capital increase.
China Southern Airlines advanced 1.9% after saying its passenger capacity in June rose 11.8% from the year-ago period, while cargo capacity jumped 16.4%. Passenger load factor for the last month was 82.7%, a 1.9 percentage-point improvement from June 2016.
Brokerage Citic Securities, a unit of conglomerate Citic, slid 0.9% after saying its preliminary profit for the first half fell 6% to 4.9 billion yuan ($722.5 million).
CRCC High-Tech Equipment slumped 14% after the railway-track-maintenance machine maker said it expects half-yearly profit to drop 85% to 91% after a 40% to 46% decline in revenue for the period. CRRC, a major shareholder in the company, dropped 0.6%.
-- Suzannah Benjamin and V. Phani Kumar