Hong Kong stocks end morning higher but key index remains below 19,000 amid currency fears
Originally published at the South China Morning Post on January 21, 2016.
Hong Kong and mainland China stocks finished the morning session higher on Thursday, although Hong Kong’s benchmark Hang Seng Index remained below the 19,000 level as concerns over the local currency continue to plague the market.
The Hang Seng Index closed the morning at 18,945.60, up 0.31 per cent or 59.30 points, while the Hang Seng China Enterprises Index gained 0.21 per cent or 16.94 points to finish at 8,032.38 at the midday break.
Louis Tse Ming-kwong, director of VC Brokerage, said the morning’s gains represented a technical rebound. Despite heavy fluctuations in two major US indices overnight, US stocks had been able to recover quite a bit, which might have helped contribute to the gains, Tse said.
“At the moment it’s still more of a yo-yo situation,” Tse said, adding that the Hong Kong market was very much oversold. “The peg of the US dollar and Hong Kong dollar is still under attack. [The exchange rate] is better than yesterday, but still the battle is not over yet.”
The offshore yuan continued falling on Thursday morning, trading at 6.6033 at 10 am. The currency has fallen for three days in a row. The onshore yuan traded unchanged at 6.5778.
“Selling pressure against Hong Kong dollar intensifies,” Bank of America Merrill Lynch said in a research report. “We revise our USD/HKD forecast to 7.85 for 2016 as a whole and revise our 3M (three-month) Hibor (Hong Kong interbank offered rate) forecast up.”
Semiconductors, up 0.89 per cent, insurance, up 0.41 per cent, mining, up 0.16 per cent, and banks, up 0.08 per cent, were some of the industries that led the gains on Thursday morning.
Among the stocks with the highest turnover, Tencent rose 1.48 per cent to HK$137.4, HSBC fell 1.22 per cent to HK$52.5, China Mobile gained 0.19 per cent to HK$80.15 and CNOOC rose 0.61 per cent to HK$6.62.
The Shanghai Composite Index closed the morning session at 2,991.78, up 0.51 per cent or 15.09 points, while the CSI 300 – which tracks large-caps listed in Shanghai and Shenzhen – gained 0.65 per cent or 20.69 points to 3,195.07.
The Shenzhen Composite Index rose 0.78 per cent or 14.68 points to 1,890.98 while the Nasdaq-style ChiNext gained 1.45 per cent or 31.90 points to 2,236.55.
The People’s Bank of China set the yuan mid-price against the US dollar at 6.5585, seven basis points weaker than on Wednesday, when it set the mid-price 18 basis points stronger.
It set the mid-price against the euro stronger by 241 basis points to 7.1386, and for every 100 yen weaker by 203 basis points at 5.6037. The mid-price against the pound was set 260 basis points weaker at 9.3247.
Traders are allowed to trade up to 2 per cent either side of the mid-price for the day.
All major US indices closed lower on Wednesday, with the Dow Jones Industrial Average finishing 1.56 per cent down at 15,766.74 and the S&P 500 1.17 per cent down at 1,859.33. Both indices fell more than 3 per cent at one stage. The Nasdaq Composite finished down 0.12 per cent at 4,471.69.
With many markets sinking into bear market territory – falling 20 per cent or more from their most recent peak – the Brent oil index fell more than 5 per cent at one point overnight.