HK, China stocks rally as Trump tweets that trade talks ‘are going very well!’

10-Jan-2019 Intellasia | South China Morning Post | 6:00 AM Print This Post

Hong Kong and mainland stocks rallied Wednesday on increasing optimism that talks between the US and China could lead to an end to a trade war that has roiled global markets.

By midday, the Hang Seng Index rose 2.46 per cent, or 636.61 points, to 26,512.06, while the Hang Seng China Enterprises Index gained 2.61 per cent, or 264.22 points, to 10,397.96.

On the mainland, the Shanghai Composite was up 1.59 per cent, or 40.20 points, to 2,566.66, and the CSI 300 of large caps rose 1.95 per cent, or 59.40 points, to 3,107.10.

Trade talks between the US and China in Beijing were extended an extra day to Wednesday, signalling the world’s two largest economies could be closer to an agreement. US Energy Department official Steven Winberg told reporters in Beijing Tuesday that the discussions “went well.”

Adding to optimism was an earlier tweet by President Donald Trump, exclaiming “Talks with China are going very well!”

US stocks rallied overnight on the back of the positive tone. All three major indices ended higher.

“The Sino-US talks are progressing well and boosted the sentiment of the market,” said Louis Tse Ming-kwong, managing director of VC Asset Management.

“Yesterday, the [Hong Kong] market consensus was that 26,000 was a strong resistance. This morning it opened high at about 26,000, so it is gaining momentum. There is an increased turnover this morning, of 32 billion, which for this couple of weeks is exceptional,” he added.

On a less positive economic note, the World Bank cut its forecast for the global economy in a semi annual update to its outlook on Tuesday, citing the threat of “disorderly” market movements and escalating trade disputes as heightening risk.

The Washington-based bank forecast 2.9 per cent global growth this year, down from 3 per cent. For emerging markets, it lowered growth projections by 0.5 points to 4.2 per cent.

Meanwhile, billions of Xiaomi shares have been unlocked for sale on Wednesday, marking an end to the smartphone maker’s IPO lock-up since the company listed on July 13.

By midday, Xiaomi was down 2.88 per cent to HK$10.78, remaining at its lowest level since debuting on the Hong Kong stock exchange.

On Tuesday JPMorgan lowered its target price for Xiaomi from HK$18 to HK$10.5 and downgraded its rating from “neutral” to “overweight”. Deutsche Bank also lowered theirs, from HK$21.4 to HK$18.6, but maintained its “buy” rating.

As of Wednesday midday, Xiaomi stock had dropped almost 17 per cent in the new year and was down 20 per cent in the past four weeks. That was far worse than its peers. The information technology hardware sector is down 2.5 per cent so far this year and 3.9 per cent in the past four weeks.

In other sectors, Great Wall Motor surged 12 per cent by midday, to HK$4.83. That was its highest level since December 6.

The Chinese carmaker signed a memorandum of understanding with Israel-based technology firm Mobileye, to develop autonomous driving systems for China. In addition, on Tuesday, the carmaker reported good sales. Total sales volume for the company in December 2018 was 133,794 units, a year-on-year increase of 6.54 per cent. Total production volume was 135,800 units, a year-on-year increase of 14.14 per cent.

Automobiles generally were mostly up on Wednesday, after declines due to poor sales. China has been taking policy steps to free up money for lending and spending, which could boost consumer buying amid a slowdown in the economy.

By midday, Geely was up 8.81 per cent to HK$11.12, Brilliance China gained 3.13 per cent to HK$6.27, Zhongsheng Holdings rose 3.66 per cent to HK$15.28 and Minth Group had added 3.67 per cent to HK$25.25.

Tse of VC Asset Management said the movements were not an upwards trend, but rather a rebound.

“It is time to face the reality. It is judgment day time. Sales slowed down and you don’t have that sort of demand for changing cars that often nowadays,” he said. “Geely has been down quite a bit, but today is a rebound, not an uptrend. Short sellers are squaring their positions.

“After this rebound, it will go down again,” he added, citing tariffs as a result of the US-China trade war. “I am still putting a big question mark over carmakers.”

China Life and AIA led gains among insurers after Daiwa Research lifted them both. By midday, China Life was the leader in the financials sub-index, up 3.86 per cent to HK$17.22, while AIA was up 2.97 per cent to HK$65.90 in its highest level since December 4, 2018.

CK Asset rose 3.3 per cent to HK$64.55, its highest level since June 22, on news that the property developer plans to convert its Harbour Plaza Resort City hotel in Hong Kong’s New Territories into Hong Kong’s densest housing estate. It is to have 5,000 flats and two 53-storey residential towers, according to a document filed with the town planning board.

Meituan Dianping also shot up 5.2 per cent to HK$46.20 after the Chinese e-commerce platform announced it had signed an agreement with automotive supplier Valeo from France, AI computing firm NVIDIA from the US and automotive designer Icona from Italy, to boost its autonomous delivery.


Category: FinanceAsia

Print This Post