Hong Kong Stocks Advance as Chinese Banks Climb Before Earnings

  • Any Federal Reserve rate increase will hurt inflows: analyst
  • China Southern Airlines leads carriers lower after profit drop

Hong Kong stocks advanced as Chinese banks climbed before releasing earnings. China Southern Airlines Co. led declines by carriers after reporting lower profit.

The Hang Seng Index added 0.9 percent at the close, taking its gain for August to 5.1 percent. Industrial & Commercial Bank of China Ltd. was set for its best month since April last year, while Bank of China Ltd. posted its biggest daily advance in two weeks. China Southern plunged more than 6 percent, while China Eastern Airlines Corp. dropped the most in two months. The Shanghai Composite Index closed 0.2 percent higher.

Hong Kong stocks have climbed in August as the city’s property market stabilized and company earnings from Tencent Holdings Ltd. to Ping An Insurance Group Co. beat estimates. Gains have petered out in the past two weeks amid increasing probability of the Federal Reserve boosting interest rates this year and data showing China’s growth faltered in July. Investors are awaiting U.S. jobs data on Friday for clues on the strength of the American economy.

“Any U.S. rate hike in September will hurt inflows and bank and property stocks,” said Castor Pang, head of research at Core-Pacific Yamaichi Hong Kong. “But they’re staging a modest rebound today. Investors are still waiting for U.S. payrolls data and the market will largely remain less directional.”

Fed Bets

Futures indicated a 36 percent chance that the U.S. will raise rates in September as of Monday, up from 24 percent a week earlier, and Fed Vice Chairman Stanley Fischer has said Friday’s payrolls data will be key to the central bank’s decision making. The report is projected to show employers added 180,000 jobs this month, following a gain of 255,000 in July.

The Hang Seng Index closed at 23,016.11. The Hang Seng China Enterprises Index gained 1.1 percent. The Shanghai Composite Index edged higher, with a 10-day volatility gauge near a two-year low. PetroChina Co., which has the second-highest weighting on the Shanghai gauge, reversed an earlier loss to close 0.9 percent higher. The Chinese equity benchmark has risen 3.2 percent so far in August, the most since March.

ICBC rose 1 percent in Hong Kong, propelling August’s gains to nearly 14 percent. The world’s largest lender by assets reported after the market close the first decline in its bad-loan ratio since 2012, while eking out a 1 percent profit growth in the second quarter.

Bank of China climbed 1.5 percent on Tuesday, extending this month’s advance to 8.2 percent. The bank posted a higher-than-forecast 3.4 percent increase in second-quarter profit after the end of the day’s trading.

Limited Upside

China Southern fell to its lowest close since July 12 after the yuan’s depreciation dented its first-half profit. China Eastern declined 4.1 percent.

“The upside for Chinese shares is still limited,” said Steven Leung, executive director at UOB Kay Hian (Hong Kong) Ltd. “The economy is not strong enough. Any recovery in earnings seem to come from one-off restructuring or cost cutting.”

A long-awaited link between stock markets in Hong Kong and the mainland city of Shenzhen is expected to start in mid- to late November, according to China’s markets regulator. Guoyuan Securities Co. and Pacific Securities Co. climbed at least 1.5 percent each in mainland trading, pacing an advance by financial companies.

Technical preparations for the link will take place from August to November, with the program scheduled to begin that month, according to a presentation slide at a China Securities Regulatory Commission press briefing in Beijing. No official start date has previously been given.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE