Hong Kong’s benchmark index snapped a four-day winning streak on Wednesday to close slightly lower, but trading volumes increased as investors remained upbeat about the stock market outlook after the Federal Reserve looked increasingly likely to hold off on a near-term interest rate rise.
The Hang Seng Index crept higher in early trade, but soon reversed its course, slipping 0.2 per cent or 45.87 points back to close at 23,741.81.
However, the index has still advanced 3.3 per cent so far this month, driven by strong fund inflows into Hong Kong as odds of a September Fed rate increase continue to fall.
The Hang Seng China Enterprises Index, or the H-shares index, extended its bull run to a fifth straight session on Tuesday, up 0.3 per cent or 31.8 points to 9,970.19. The H-shares index has jumped 4.5 per cent so far this month.
Hong Kong market turnover for Wednesday increased to HK$80 billion, from HK$76 billion on Tuesday.
In the mainland, the Shanghai Composite Index eked out gains to close the day just higher by 0.04 per cent or 1.22 points at 3,091.93. The index has risen for four days in a row.
The large-cap CSI300 dipped 0.1 per cent or 1.81 points to 3,340.82. The Shenzhen Component Index edged down 0.2 per cent or 22.78 points to 10,838.72. The Shenzhen Composite Index also closed 0.2 per cent or 3.64 points lower at 2,044.55. The Nasdaq-style ChiNext Index dropped 0.5 per cent or 10.78 points to 2,212.05.
Mainland market turnover also rose to 561 billion yuan from Tuesday’s 532 billion yuan.
Analysts now say that weaker US economic indicators and jobs figures have significantly reduced the chances of an imminent interest-rate increase by the Fed. Its actions usually have a big impact on financial markets worldwide, as lower US interest rates drive investors in search of higher yields and spark capital inflows to emerging markets.
“After a month of hawkish Fed talk, the trifecta of terrible ISM manufacturing and non-manufacturing PMIs and weaker than expected non-farm payrolls have left the quixotic calls for September rate rise dead in the water,” said Angus Nicholson, an analyst for IG Group.
“This was great news for under-pressure commodities and emerging markets,” Nicholson said.
In a research note last week, analysts from Bright Smart Securities said although Hong Kong stocks face some selling pressure after recent strong performance, “trading volumes are at a high level, suggesting investors are still willing to invest”.
“Hong Kong stocks may continue rising and touch new highs. Nonetheless, investors need be cautious about a potential small technical correction.”
Dragging the benchmark index on Tuesday was Chinese online major Tencent Holdings, which pulled back from record highs and fell 0.9 per cent to HK$213.2. The company had jumped more than 6 per cent in the previous two sessions, after passing China Mobile to become Asia’s most valuable company by market capitalisation.
Another index heavyweight HSBC Holdings also retreated after recent gains and declined 1.5 per cent to HK$59.05 on Wednesday.
The biggest loser in Hong Kong was Ching Lee Holdings, which dived 91 per cent to close at 46 Hong Kong cents. The Hong Kong-based construction works service provider saw HK$256 million worth of shares change hands, as its market cap shrank to HK$450 million by the end of Wednesday, compared with HK$4.9 billion on Tuesday, as some of its institutional shareholders dumped their stock. Ching Lee started trading on the Growth Enterprise Market board on March 29.
However, insurance stocks bubbled higher, gaining 1.3 per cent on average as investors welcomed the recently-released new rules from the China Insurance Regulatory Commission to tighten restrictions on risky, high-yield life insurance products.
“The new rules are aimed at limiting the sector’s liability costs and liquidity risks, and should improve the overall quality of new policies,” said Esther Chwei and Lexie Zhou, analysts at Deutsche Bank, in a research note on Wednesday.
“These changes should help curb the irrational competitive behaviours of some private insurers that focused mainly on selling short-term investment products.”
Gold-related shares also bucked the market trend and posted a broad rally, after gold futures advanced overnight to their highest close in nearly three weeks.
Gold miner Lingbao Gold climbed 3.4 per cent to HK$1.83. Zhaojin Mining Industry rose 1 per cent to HK$8.45. Smaller rival Taung Gold International soared 9.8 per cent to 11 Hong Kong cents.
In the mainland, gold miners also advanced, with Shandong Gold Mining up 1.7 per cent to 43.15 yuan and Zijin Mining Group up 1.2 per cent to 3.4 yuan.
With additional reporting from Cathy Zhang