HONG KONG (Nikkei Markets) - Automakers led Hong Kong stocks higher on Wednesday on speculation that environmentally friendly cars will enjoy stronger support from Chinese policymakers. The broader market posted modest gains in cautious trade before the U.S. Federal Reserve's policy announcement later in the day.
Geely Automobile Holdings climbed 5.7% to an all-time high of HK$24 and BYD advanced 12.7% to set a new seven-year peak of HK$68.90. BYD has soared 48% so far this month and Geely 25%, after state media reported plans to eventually end the sale of gasoline and diesel cars in favor of green vehicles. Geely's rally came after the Hong Kong Economic Times on Wednesday cited Chief Executive Gui Sheng Yue as saying that the automaker is "very likely" to exceed its 2017 sales target of 1.1 million vehicles and reach a target of 2 million vehicles in 2019.
Several other automotive shares also rallied, with Dongfeng Motor Group rising 4.6%, BAIC Motor gaining 4.9% and Guangzhou Automobile Group adding 2.4%.
Automobile sales in China, the world's largest by sales volume, climbed 4.3% to 17.5 million vehicles in the first eight months of the year from a year earlier, industry data show. While shares of most Chinese automakers have outperformed the broader market, some analysts caution the rally may be overdone.
"Even though alternative energy cars may enjoy greater market penetration with the help of state policy," said Linus Yip, chief strategist at First Shanghai Securities, the government has yet to announce a timetable for the replacement of gasoline-fueled cars. He said the industry was unlikely to sustain its year-on-year growth rate over coming months.
The benchmark Hang Seng Index gained 0.3% to close at 28,127.80, nearing a 28-month high, as investors await the Fed's policy decision later on Wednesday. More than HK$97 billion ($12.5 billion) of local stocks changed hands.
While the U.S. central bank is widely expected to leave interest rates unchanged, there is speculation it may detail plans to unwind its bond holdings, an action HSBC warns could trigger a correction in Asian equities.
"With the U.S. central bank widely expected to start normalizing its balance sheet, risks are building that the volatility could pick up in the near term," Fred Neumann, co-head of Asian economics at HSBC Global Research, wrote in a research report. "Equity markets have had a good run so far in 2017, but further upside may be not be quite as impressive."
Some real estate companies retreated after a recent rally. Sunac China Holdings fell 2.8%. China Huarong Asset Management has suspended new loans to the company, but Sunac said this was the result of normal risk control, rather than regulatory pressure.
Link Real Estate Investment Trust fell 1%. The REIT is inviting bids for 17 Hong Kong shopping malls with an estimated market value of HK$14.5 billion, the Hong Kong Economic Times reported Wednesday, citing an unnamed market participant. A Link spokesperson said that the company was "undertaking a strategic review of our asset portfolio" and that the review may not lead to any transactions.
Insurer PICC Property & Casualty dropped 0.7% despite a nearly 12% increase in its accumulated premium income for the first eight months of this year. Parent People's Insurance Company (Group) of China ended unchanged at HK$3.52 after posting a year-on-year decline in collected health insurance premiums for the January to August period.
Melco International Development soared almost 14%. Stock exchange data showed Chairman Lawrence Ho acquired 2.25 million additional shares in the casino operator, raising his stake to 53.5%.
Sisram Medical, a unit of Shanghai Fosun Pharmaceutical Group, jumped 9.6% to HK$8.90, climbing above its initial public offering price of HK$8.88. The stock declined on its debut Tuesday.
Meanwhile, Shanghai Fosun Pharmaceutical, itself a unit of diversified conglomerate Fosun International, gained 6.2%. The drugmaker may consider listing its mature businesses independently, Hong Kong Economic Times reported Wednesday, citing Co-President Chen Qiyu.
Technology investment company Kuangchi Science rallied 17%. The company said Wednesday a unit has entered a cooperation agreement with China Telecommunications related to public security and traffic related services.
-- Amy Lam and Carrie Chen