Hong Kong stocks rise to 8-month highs after China property relief, high dividend-yielding stocks in focus
Hong Kong stocks advanced to eight-month highs amid optimism that China’s economic recovery is on track, with additional boost provided by growing odds of an interest-rate cut by the US Federal Reserve after tepid US jobs data. High dividend yield stocks surged on talk that Beijing may scrap a dividend tax on Hong Kong-listed shares available for mainland investors.
The Hang Seng Index rose 1.7 per cent to 18,859. 60 at the noon trading break, on track for its highest close since August 11. Since Monday, the 82-member benchmark has climbed 2.1 per cent, its third straight weekly gain. The Hang Seng Tech Index slipped 0.3 per cent and the Shanghai Composite Index fell 0.2 per cent.
Hong Kong Exchanges and Clearing, the operator of the city’s bourse, jumped 6.8 per cent to HK$283.60 after its new chief executive Bonnie Chan Yiting said that listing applications surged this year. Semiconductor Manufacturing International Corp added 2 per cent to HK$16.34 after reporting 23 per cent revenue growth in the first quarter.
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Optimism is growing that China’s recovery will gather further pace after two key cities of Hangzhou and Xian scrapped all restrictions on home purchases, and both imports and exports beat projections last month. A Politburo meeting chaired by Communist Party boss Xi Jinping at the end of April vowed to tackle the crisis on the property market.
View of the city of Xian (Sian, Xi’an), Shaanxi province, China. Photo: Shutterstock
“The recovery in China’s fundamentals is continuing and corporate earnings are bottoming out,” said Song Yiwei, an analyst at Bohai Securities in Tianjin. “Meanwhile, expectations that the Fed will cut interest rates in September have been growing. All these factors are driving re-rating of Chinese stocks.”
The Hang Seng Index has extended its world-beating run since April, and has risen more than 6 per cent this month, as mainland China’s securities regulator pledged support by expanding the exchange link programme with the city and lifting the quality of listings.
China Construction Bank jumped 6.3 per cent to HK$5.61 and peer Industrial and Commercial Bank of China surged 4.6 per cent to HK$4.55, while China Resources Power soared 4.8 per cent to HK$20.85. Speculations are swirling that the China Securities Regulatory Commission and the State Taxation Administration are mulling a proposal that will waive a 20 per cent dividend tax on the stocks mainland investors can buy via the exchange link programme with Hong Kong.
“It’s a highly likely move by the Chinese regulator to further restore sentiment on the Hong Kong market,” said Dai Ming, a fund manager at Huichen Asset Management in Shanghai. “That will align the tax policy with the practice on the mainland and it may be announced any time.”
Markets across Asia rallied this morning after the US jobless claims topped estimates to rise to the highest since August, hinting at a cooling jobs market that could justify a cut in interest rates by the Fed. Japan’s Nikkei 225 climbed 0.6 per cent, while South Korea’s Kospi and Australia’s S&P/ASX 200 both added 0.5 per cent.
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