July 14, 2017 7:35 pm JST

China lenders propel Hong Kong shares to best week in a year

HONG KONG (Nikkei Markets) -- Hong Kong shares posted their sharpest weekly gain in a year, fueled by speculation the U.S. Federal Reserve will adopt a cautious stance toward monetary tightening. Chinese banks led the rally.

The Hang Seng Index climbed 4.1% over the week, ending with a 0.2% advance to 26,389.23 in choppy trading Friday. Industrial & Commercial Bank of China (ICBC) and China Construction Bank (CCB) each rose at least 7.9% for their best weekly performances in more than a year. The gains were helped by a favorable view on net interest margins from Morgan Stanley, which raised its price targets for the Hong Kong-listed shares of the lenders in a report this week.

Ping An Insurance Group added 5.7% over the week on strengthened expectations for solid earnings growth after it reported a 33% increase in first-half premium income. ICBC and CCB added 0.2% each on Friday when Ping An gained 1.8%.

In her twice-a-year testimony before U.S. lawmakers this week, Fed Chair Janet Yellen signaled borrowing costs will rise only gradually, adding that rates won't have to climb "much further" to reach a neutral level. The Hang Seng Index, which reclaimed the 26,000 level this week after a month below it, ranks among Asia's best-performing equity benchmarks so far this year.

"There are a lot of good stocks for investors to buy," said Banny Lam, head of research at CEB International Investment. "I see 26,000 as a support level, and with ample liquidity in the market, it will not be easy to go down to that level."

The Hang Seng Index also received solid support from a rally in technology heavyweights Tencent Holdings and AAC Technologies Holdings, which each added at least 5.9% this week on the back of tech-stock gains in the U.S. Tencent added 0.1% and AAC declined 2% on Friday.

The Hang Seng China Enterprises Index of large mainland companies listed in the city gained 0.5% on Friday, taking its weekly gain to 4.6%, its biggest since November. Chinese brokerage Huatai Securities was the gauge's top performer, with a 8.6% rise since July 7, following news of a 12% jump in its net profit for June. The brokerage firm climbed 0.1% on Friday.

The Shanghai Composite, meanwhile, squeezed out a fourth straight weekly advance after rising 0.1% on Friday. China is due to release official monthly data on retail sales and industrial output on Monday, along with the second-quarter gross domestic product figures.

Asia's largest economy likely grew 6.8% last quarter, slowing from a 6.9% expansion in the three months ended March 31, according to China economists surveyed by Nikkei Asian Review.

"China actually seems to have performed quite well in the second-quarter," Lam said. "The market right now is more concerned about whether the same trend is sustainable in the second half." He cited government policies as an uncertain factor.

BOE Technology advanced 2.3% in Shenzhen on Friday after saying it expects to return to profit in its half-year results, compared with a loss a year earlier.

Trading in China Vanke shares was halted in Hong Kong and Shenzhen at the company's request, pending the release of inside information. Vanke had risen 2.4% in Hong Kong and 0.7% in Shenzhen by the noon break.

Angang Steel advanced 3.2% in Hong Kong after saying it expects a six-fold increase in first-half net profit. China Goldjoy Group added 7.7% after the automation-equipment trader forecast a more than a five-fold increase in first-half profit, helped by gains from the sale of an associated entity.

Property developer Henry Group Holdings jumped 8% on plans to sell its interest in Seedtime International for HK$965 million ($124 million). Media company Next Digital surged almost 16%. The reason for the move was not clear.

China Candy Holdings tumbled 57% to 22.9 Hong Kong cents after saying a conditional cash offer by Ever Maple Flavors and Fragrances Holdings for 35.65 Hong Kong cents a share had lapsed and will not be extended or revised, as conditions of the offer weren't satisfied.

Lifestyle China Group slumped 8.5% on Friday after the department store operator surged 28% on Thursday. The reason for the sharp swings wasn't known.

-- Suzannah Benjamin and V. Phani Kumar

Asia300

Industrial & Commercial Bank of China Ltd.

China

Market(Ticker): HKG(1398)
Sector:
Industry:
Finance
Major Banks
Market cap(USD): 302,497.78M
Shares: 356,406.26M
Asia300

China Construction Bank Corp.

China

Market(Ticker): HKG(939)
Sector:
Industry:
Finance
Major Banks
Market cap(USD): 215,648.31M
Shares: 250,010.98M
Asia300

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

China

Market(Ticker): HKG(2318)
Sector:
Industry:
Finance
Multi-Line Insurance
Market cap(USD): 146,998.21M
Shares: 18,280.24M
Asia300

Tencent Holdings Ltd.

China

Market(Ticker): HKG(700)
Sector:
Industry:
Technology Services
Internet Software/Services
Market cap(USD): 421,516.69M
Shares: 9,498.62M
Asia300

China Vanke Co., Ltd.

China

Market(Ticker): HKG(2202)
Sector:
Industry:
Finance
Real Estate Development
Market cap(USD): 47,204.18M
Shares: 11,039.15M
Asia300

BOE Technology Group Co., Ltd.

China

Market(Ticker): SHE(000725)
Sector:
Industry:
Electronic Technology
Electronic Equipment/Instruments
Market cap(USD): 21,003.67M
Shares: 34,798.39M

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