Hong Kong stocks jump most in six weeks on optimism MSCI to add A-shares
HONG KONG (Nikkei Markets) -- Hong Kong stocks posted their steepest advance in six weeks on optimism MSCI will include China's domestic shares in the index provider's global equity indexes.
The Hang Seng Index rose 1.2% to 25,924.55, the day's top performer among regional benchmarks. Turnover on the main board was about HK$66 billion ($8.5 billion) on Monday, the lowest in almost three weeks. An index of mainland companies listed in Hong Kong added 1.3% as 34 of its 40 members notched gains, led by brokerages and insurers. Ping An Insurance Group added 4%, while China Galaxy Securities and Citic Securities, a unit of Citic, increased at least 1%.
Several analysts and money managers, including those at Jefferies and AXA Investment Managers, see more than a 50% chance that MSCI will include yuan-denominated A-shares in its global benchmarks this year after deciding against the move over the past three years. An approval might pave the path for billions of additional investment dollars into mainland equities and potentially give institutional investors a greater presence in a market currently dominated by individuals. The decision is due early Wednesday in Asia.
MSCI indexes currently include Chinese companies listed outside the mainland, such as in Hong Kong or the U.S., as well as foreign-currency denominated B-shares that are traded in Shanghai or Shenzhen.
"The long-awaited inclusion of A-shares in MSCI China would help institutionalize the domestic China A-share market," said Jing Ning, a portfolio manager at Fidelity International. "This would potentially increase the liquidity levels, introduce comparatively stable flows into the market and overall, it would be a noteworthy positive development for the smooth functioning of the market."
The Shanghai Composite Index added 0.7%, while the Shenzhen Composite advanced 0.6%. The yuan traded onshore weakened 0.1% to 6.8168 against the dollar. The Nikkei Asia300 Index of some of the region's most influential companies increased 0.8%.
BOE Technology Group ended unchanged at 3.98 yuan in Shenzhen trading. The digital display products and components maker said Friday it plans to buy a majority stake in France's SES-Imagotag at up to 30 euros ($33.53) per share. SES-Imagotag slid 5% to 29.40 euros in European trading.
The day's gains in Hong Kong follow a higher finish for the Dow Jones industrials in the U.S. Friday, when downbeat housing and consumer confidence data reaffirmed doubts over the pace of the Federal Reserve's future rate increases. The Fed last week increased borrowing costs and signaled one more hike by the year-end.
"The interest-rate outlook for the second half is only another 25 basis-point rate hike in the U.S. This will be quite positive for Asia," said Steven Leung, executive director at UOB-Kay Hian in Hong Kong.
CK Hutchison Holdings added 0.7% in Hong Kong, underperforming the broader market. U.K.'s telecommunications regulator on Friday reportedly fined the company's British subsidiary 1.9 million pounds ($2.4 million) for failing to provide emergency call services temporarily on its network.
China Eastern Airlines slid 1.6%. The carrier's parent said it has sold stakes in its freight unit to four firms as part of China's mixed-ownership reforms, without disclosing financial details. Meanwhile, at least 26 people were injured when a company-operated flight, bound for Kunming in China from Paris, was hit by strong turbulence, according to a Xinhua report.
Grand Peace Group rose 4.5% to HK$0.231 as trading resumed after an 86% crash in the shares on Friday led to a halt. The company said in a statement Friday night that its chairman had disposed all his 113 million shares in the market due to "personal reasons."
Hong Kong and China Gas rose 0.8%. The utility's proposed gas tariff increase is a credit positive, Moody's Investors Service said in a statement Monday. The company last week announced a price hike of about 4.3%, including basic tariff and fuel-cost adjustments, with effect from Aug. 1.
AV Concept Holdings jumped 6.5% after saying Friday it expects an increase of no less than 100 times in net profit for the year ended March 31.
-- Nimesh Vora and V. Phani Kumar