Positive start for Hong Kong, mainland stocks

Investors heartened by late 2016 rally and hopes of the mainland economy on firm track in the new year

In tandem with most Asian bourses, Hong Kong and Chinese mainland stocks staged a rally on the first trading day of 2017, continuing the market momentum on the final day of a volatile 2016.

Analysts said investor confidence was strengthened by the fact that world markets overall ended in the black last year, coupled with hopes of stabilization in the mainland's economy and the yuan in the short term.

The benchmark Hang Seng Index (HSI) jumped 149.84 points, or 0.68 percent, to close on Tuesday at 22,150.40, while the Hang Seng China Enterprise Index surged 64.68 points, or 0.69 percent, to 9,459.55.

Mainland stock markets also finished higher, with the Shanghai Composite Index and the Shenzhen Composite Index picking up 1.04 percent to 3,135.92 and 0.84 percent to 1,985.95, respectively. The CSI 300 Index rose 0.97 percent to close at 3,342.23.

Cliff Zhao Wenli, chief strategist and deputy head of the equity research department at China Merchants Securities (HK) Co Ltd, noted that the HSI had opened lower, but gradually picked up on the strong performance of local property stocks and Chinese mainland's insurance stocks, backed by better-than-expected mainland manufacturing data.

The private Caixin Purchasing Managers' Index (PMI), which records the conditions of smaller manufacturers, beat expectations with a reading of 51.9 for December - up from 50.9 the previous month - the strongest pace of growth since January 2013, indicating signs of an improvement in the world's second-largest economy.

However, Zhao expressed concern that the upward momentum of Hong Kong stocks may not last long as the current market liquidity is still relatively tight with the Chinese yuan under persistent depreciation pressure. Another negative factor for local stocks is likely to be that investors in US stocks may be poised to start reaping profits following a protracted rally on Wall Street.

He expects the HSI to dip below 21,000 before the upcoming Lunar New Year, or Spring Festival, which falls on Feb 28 this year.

According to Andy Wong, investment strategist at Harris Fraser Group, the surge in both the Hong Kong and mainland stock markets is mainly due to the impact of the technological breakthrough, leading to investors having overbought in late December last year.

For H shares, investors were also upbeat about prospects of the yuan stabilizing in the short term.

Wong projected that the upward momentum would be sustained for a while, with the HSI likely to hit 22,600 points, and the CSI 300 to touch 3,400 before the Lunar New Year. In terms of investment opportunities, he believes that the technology sector will rebound, while the hard-hit retail and consumption industries may stand to gain with the approach of the Year of the Rooster.

Meanwhile, as expected, audit firm PricewaterhouseCoopers (PwC) said on Tuesday Hong Kong topped the world in terms of the amount of funds raised through initial public offerings (IPOs) in 2016, and believes that further improvement will follow as a result of the launch of the second stocks trading link between Hong Kong and the mainland, boosting investor sentiment in Hong Kong and on the mainland.

Hong Kong saw a total of 126 new listings last year, including 81 on the main board, with total funds raised hitting HK$ 194.8 billion, a drop of 26 percent from the previous year.

Benson Wong, entrepreneur group leader at PwC Hong Kong, said the fall in the funds raised of new listings had been affected by a host of factors, such as a less-than-ideal global fundraising climate amid uncertainties, including the pace of recovery in the world economy, the aftermath of Britain's shock decision to quit the European union, Donald Trump pulling off an upset win in the US presidential election, as well as the likelihood of further hikes in US interest rates next year.

PwC expects the global investment climate to pick up gradually and estimates there will be about 130 IPOs in Hong Kong in 2017, with total funds to be raised likely to reach HK$220 billion, enabling the city to remain in the world's top three IPO slots.

tingduan@chinadailyhk.com

(HK Edition 01/04/2017 page9)