AIA, China Life propel Hang Seng Index to its best weekly finish in over two months

Yujing Liu

Hong Kong and China stocks rose on Friday to finish their best week in over two months, as investors were encouraged by a mix of positive factors including China’s monetary easing and upbeat earnings from insurers.

The Hang Seng Index rose 0.5 per cent to close at 26,179.33. The benchmark gained 1.7 per cent this week, recording its best weekly performance in nine weeks.

The Shanghai Composite added 0.5 per cent to 2,897.42, bringing its gains this week to 2.6 per cent, which is also its largest in nine weeks. The Shenzhen Component Index inched up 0.1 per cent, and the ChiNext Index of start-ups edged up 0.1 per cent.

Insurers led the advance in Hong Kong, after AIA Group and China Life Insurance reported better-than-expected earnings for the first half of this year, driven by strong growth in the mainland Chinese market.

The markets also welcomed a series of new policy developments this week. China reformed its interest rate formation mechanisms that led to a lower lending reference rate on Tuesday, effectively easing the monetary policy. Over the weekend, a new plan announced by the government to transform Shenzhen into a globally competitive city also sparked investors’ enthusiasm.

Moreover, Hong Kong finally had its first tear gas-free weekend as protests remained peaceful, leading to the city’s top leader Carrie Lam Cheng Yuet-ngor to propose talks with the demonstrators.

Meanwhile, the US and Chinese trade negotiators are schedule to meet in person for the latest round of talks, White House economic adviser Larry Kudlow said on Thursday.

Whether Lam succeeds in resolving the ongoing unrest will matter far more to the market than the US-China trade talks, according to Louis Tse Ming-kwong, managing director of VC Asset Management.

“The market doesn’t expect much from the trade talks,” Tse said, adding that the impact from Trump’s proposed 10 per cent tariffs to take effect in September has been priced in.

“We want to see more about this platform of dialogue and more talks about resolution,” he said.

In addition, uncertainties in the global interest rate environment could also affect the Hong Kong market.

Standard Chartered economists expect the US Federal Reserve to cut interest rates twice by the end of 2019, equivalent to 25 basis points each, due to rising concerns over the direction of global growth and trade, said the bank’s economist Sonia Meskin, in an August 20 note.

“We believe that heightened trade uncertainty, coupled with ongoing deterioration in global growth, will worry” the US central bank’s Federal Open Market Committee, she said.

Fed chairman Jerome Powell is likely to signal where US rates are headed at the annual gathering of world central bankers this weekend in Jackson Hole, Wyoming.

Insurers rose broadly in Hong Kong. AIA Group jumped 2 per cent to HK$77.75 and contributed 54 points to the Hang Seng, the largest among the 50 constituents. China Life Insurance gained 3.2 per cent to HK$18.72.

Li & Fung, the world’s largest consumer goods supply chain manager, gained as much as 8 per cent before paring some of the gains to 3 per cent by close. It reported a US$21 million net profit for the first-half, against a loss of US$86 million in the year-earlier period.

Bucking the trend was AAC Technologies Holdings, maker of smartphone acoustic components, which plunged by as much as 5.4 per cent after announcing a 57 per cent decline in first-half profits from a year ago.

On the mainland, pharmaceutical stocks advanced broadly, as investors’ enthusiasm was pushed higher by a new list of drugs covered by the national health insurance released on Tuesday.

Jiangsu Hengrui Medicine, a developer of cancer drugs, soared 6.8 per cent to a new high of 76.6 yuan on the back of its new PD-1 drug to treat Hodgkin’s lymphoma.

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