Hong Kong and mainland stock markets held on to shrinking gains on the kick-off to the first full week of trading in 2019, as traders remained cautious despite trade talks starting, a step by Beijing to boost liquidity, and the US Federal Reserve chairman signalling a possible pause in rate increases.
The Hang Seng Index edged up 0.82 per cent, or 209.67 point, to 25,835.70, after floating close to 26,000 earlier on Monday. The Hang Seng China Enterprises Index rose 0.94 per cent, 94.20, to 10,123.85.
On the mainland, the Shanghai Composite closed up 0.72 per cent, or 18.22 points, to 2,533.09, while the CSI 300 of large caps gained 0.61 per cent, or 18.43 points, to 3,054.30.
Traders had a lot of news to weigh.
On Monday, a team led by Deputy US Trade Representative Jeffrey Gerrish began a two-day meeting with China officials in Beijing, seeking to make progress toward ending the US-China trade war.
Meanwhile, other significant news broke after markets had closed in Asia on Friday.
The People’s Bank of China cut the amount of cash lenders must hold as reserves by 1 percentage point. The cut means 800 billion yuan (US$117 billion) will be released in liquidity, offsetting a squeeze before the Chinese New Year holiday at the beginning of February.
Out of the US, Fed Chairman Jay Powell said he is “listening” to markets and would be “patient to see how the economy evolves.” That was read to mean he is open to pausing rate hikes that have partly been blamed for market volatility and poor performance in the US. Meanwhile, the US posted blowout new jobs data, calming investor fretting about the strength of the US economy.
The combination got Hong Kong and China markets off to a strong start, but they fell back as the day wore on.
Investors are waiting for the outcome of trade talks and questioning the real impact of the rate cuts, said Louis Tse Ming-kwong, managing director of VC Asset Management.
“Given that they started meeting today, I think some of the investors want to stay put and see what happens in the trade talks,” he said. “The turnover is still thin.”
Some analysts are not convinced the PBOC will inject the amount stated into the economy, according to Tse, and incentives from the news have now been discounted. “We have seen this before, we are questioning whether it is actually that amount,” he said.
But the gains were still gains. And they built on the more than 2 per cent jumps in both the Hang Seng and the Shanghai Composite on Friday after a rocky start to the new year. Traders are still feeling the pain of 2018, when the Shanghai benchmark lost 25 per cent – making it the world’s biggest major market loser – and the Hang Seng was down 15 per cent.
Banks in Hong Kong and the mainland ended up, but with smaller gains than in earlier trading.
In Hong Kong, the Hang Seng Bank ended up 0.54 per cent to HK$168.70, while the Bank of China Hong Kong gained 1.6 per cent during morning trading before retreating to close up 0.18 per cent at HK$28.15. HSBC Holdings was up 0.86 per cent to HK$64.90, while ICBC stayed up at 0.36 per cent to HK$5.54.
On Sunday night, Xiaomi Group announced that it bought over 65 million shares of TCL Corp., giving it a 0.48 per cent stake in the Guangdong-based home appliance maker’s share capital as of January 4.
Under the agreement, signed on December 29, the two companies pledged to carry out joint research on the development of smart products and electronic devices.
TCL rose 3.5 per cent to 2.66 yuan on the Shenzhen Stock Exchange. Xiaomi was up 0.33 per cent to HK$12.00.
Shares of New China Life plummeted 7.56 per cent to HK$28.10 in Hong Kong, and 6.72 per cent to 40.51 yuan in Shanghai after Beijing Business Daily cited an anonymous source as saying the company’s chairman and president, Wan Feng, may not be re-elected and could relocate to ShinKong Insurance.
A media spokesperson for the company said the reports were rumours and only in March, after the company meeting, will it be clear whether he will stay in the position he has held since 2016. Three years is the usual amount of time for the position, the spokesperson added.
China Mobile climbed 1.5 per cent to HK$77.95 in its highest close since October 18 after Nomura upgraded the company to “buy” from “neutral”, raising the target price from HK$79 to HK$102. It said the group is set to become a key beneficiary in the development of 5G.
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