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Nikkei Markets

ASIA MARKETS: ICBC, AIA Drive Hong Kong Stocks To Best Gain Since March As Yellen Awaited

By V. Phani Kumar
Nikkei Markets
HONG KONG (Jul 11) -- Hong Kong shares notched their best session in nearly four months on Tuesday as expectations for a brighter earnings outlook underpinned a rally in financial companies.

Industrial & Commercial Bank of China (ICBC) jumped 3.1%, its steepest bounce in more than a year, while smaller state-owned peers China Construction Bank (CCB) and Agricultural Bank of China (ABC) added at least 2.9%. The advances came as Morgan Stanley raised its price targets for the Hong Kong-listed shares of Chinese banks by an average 5% in a note released Tuesday, based on a rosier outlook for their net interest rate margins.

Anticipation surrounding Federal Reserve Chair Janet Yellen's two-day congressional testimony starting Wednesday added to the buoyancy in the financial sector. HSBC Holdings increased 0.6% to a fresh two-year high and AIA Group climbed 2.4% to near a record level amid speculation they would both benefit in a rising interest-rate environment.

In her semi-annual testimony, Yellen is widely expected to discuss the Fed's roadmap for interest-rate increases and plans to reduce monetary stimulus by winding down the central bank's bond investments.

"I think we are closely watching what Yellen is going to say tomorrow," said Steven Leung, executive director at UOB-Kay Hian in Hong Kong. "If she says they're going to shrink the balance sheet, likely in September, and also have another round of interest-rate increases by the end of this year, the current market situation will continue," he added, referring to the performance of financial-sector shares.

The benchmark Hang Seng Index rose 1.5% to 25,877.64, while a gauge of large Chinese companies listed in the city jumped 2%. The Nikkei Asia300 Index advanced 1.1%.

Over in the mainland, the Shanghai Composite fell 0.3% amid concerns policy makers were likely to maintain a less accommodative monetary stance as they strive to control financial risks. The People's Bank of China on Tuesday added just enough cash into the nation's money markets, its first injection in 13 days, to replenish the funds being drained by maturing reverse repo securities. The yuan was little changed against the dollar at 6.7995.

"The liquidity situation in China is still a little bit tight. I don't think any short-term activities will help to solve this problem," Leung said.

Sunac China Holdings surged 13.7% to HK$16.82, just shy of a record high, after the developer agreed to buy assets from Dalian Wanda Group for $9.3 billion. The deal failed to impress S&P Global Ratings, which put the developer's ratings on credit watch for a possible downgrade. "Sunac's financial leverage could further deteriorate following the large land acquisitions and expansion in the non-core segments," the ratings agency said in a statement Tuesday.

Geely Automobile Holdings jumped 7.5% to an all-time peak after the carmaker said it expects first-half profit to more than double from a year ago. Geely is the Hang Seng Index's best performer this year, with its 150% surge more than 100 percentage points higher than the next best gainer, Tencent Holdings.

Tencent climbed 2.5% Tuesday, taking its year-to-date gains to 47%.

China Jinmao Holdings rose 2% after the real estate company forecast a 100% increase in profit for the six months ended June 30.

Developer CIFI Holdings Group jumped 6.3% after alerting investors that its profit for the first half of 2017 should at least double.

Hong Kong Education International Investments slumped 5.4% after forecasting a "substantial increase" in net loss for the year ended June 30.
- By V. Phani Kumar; phani.kumar@nikkeinewsrise.com; +852 3960 5102
- Edited By Suzannah Benjamin
- Send Feedback to feedback@nikkeinewsrise.com
- Copyright (c) 2017 Nikkei NewsRise Asia Pte Ltd

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