Hong Kong and mainland shares advanced on Monday amid anticipation that index complier MSCI will include yuan-traded stocks in its global benchmarks this week.
While any positive decision by MSCI, due on Tuesday evening in New York, is expected to be seen only as “symbolic”, it is unlikely to result in sharp, immediate capital inflows into the mainland stock markets given their expected small weightings, analysts said.
The global index complier previously rejected the inclusion of mainland shares during reviews held in each of the past three years. Morgan Stanley said this year’s chance is more than 50 per cent while Goldman Sachs said the odds are 60 per cent in favour.
The Hang Seng Index advanced 1.2 per cent, or 298.06 points, to 25,924.55, paring losses of 1.6 per cent last week triggered by a rout in US technology stocks. The Hang Seng China Enterprises Index gained 1.3 per cent, or 135.91 points, to 10,520.80.
Insurers led gains, with China’s Ping An Insurance jumping 4 per cent to HK$52.15 after it said the 5-month premium income of its subsidiaries were up 33.8 per cent to 297.6 billion yuan (US$43.66 billion) and was included by Credit Suisse as one of the top picks for Chinese insurers. PICC Property and Casualty rose 2 per cent to 13 yuan.
Dah Sing Financial climbed 5.1 per cent to HK$63.7 while Dah Sing Banking rose 3 per cent to HK$16.7 after the group said that the sale of Dah Sing Insurance and Dah Sing Life Assurance to Tahoe Investment, formerly known as Fujian Thai Hot Investment, has been completed. Last year, the group said it would sell its life insurance operations in Hong Kong and Macau for HK$10.6 billion to the Fujian investment company, subject to regulatory approval and shareholders’ agreement. The share sale of the Macau Life Insurance Company however remains outstanding, Dah Sing said in an exchange filing on Monday.
Hong Kong Exchanges and Clearing advanced 2.7 per cent to HK$203 after the exchange operator released a consultation paper on its proposal on Friday to establish a Third Board designed to encourage technology firms to list in the city.
That would be the third in the market after the main board and the Growth Enterprise Market. The Third Board is tailored to attract large, new economy firms with dual class share structures, as well as start-ups.
Hong Kong’s stocks are among the best-performing markets in Asia this year, with the Hang Seng Index advancing 18 per cent in 2017, as lower valuations and the stabilisation in China’s economy lured buying from the mainland and overseas.
The shares of dual-listed companies trading in the city are 18 per cent less expensive than their mainland-traded counterparts, according to a gauge compiled by Hang Seng Bank that tracks price gaps of the two markets.
“The momentum on Hong Kong shares is still there,” said Wang Zheng, chief investment officer at Jingxi Investment Management.
“Investors are adopting the buy-on-dip strategy for bargains. That’s why every time there’s selling, buying quickly comes in to push stocks higher.”
The momentum on Hong Kong shares is still there. Investors are adopting the buy-on-dip strategy for bargains. That’s why every time there’s selling, buying quickly comes in to push stocks higher
Wang Zheng, chief investment officer at Jingxi Investment Management
In the mainland, the Shanghai Composite Index rose 0.7 per cent, or 21.20 points, to 3,144.37 driven by big-caps in the build-up to MSCI’s decision. The ChiNext, an index of smaller firms, gained 0.4 per cent. The SSE 50 Index of the 50 biggest companies on the Shanghai exchange added 1.3 per cent, paring a loss of 2.6 per cent last week.
Among the SSE 50 Index, SAIC Motor, the nation’s biggest automaker, climbed 0.8 per cent to 29.37 yuan, and liquor giant Kweichow Moutai added 1.6 per cent to 470.14 yuan.
An emerging-market stock index without mainland Chinese stocks would be “insufficient”, said Zhang Xiaojun, a spokesman for the China Securities Regulatory Commission, on Friday’s regular briefing.
Brokerages also advanced after China Securities Regulatory Commission chairman Liu Shiyu called for innovation in the sector to better serve the capital market and the economy in remarks made at a weekend industry conference.
Central China Securities rose 4.1 per cent to 10.42 yuan, Western Securities climbed 0.5 per cent to 14.46 yuan and Sinolink Securities added 2.3 per cent to 12.05 yuan.