China H Shares Pare Weekly Drop as Brexit Concern Ebbs

  • Campaigning is suspended for Brexit referendum next week
  • Liquor makers gain in mainland after CICC recommends shares

Chinese stocks in Hong Kong climbed, paring a weekly loss, after bookmakers’ odds indicated a reduced chance that Britain will leave the European Union following a June 23 referendum.

The Hang Seng China Enterprises Index added 0.9 percent, trimming its weekly drop to 3.9 percent. Banks and insurance companies led gains. Stocks got a boost across Asia as campaigning around Britain’s EU membership vote was suspended following the murder of a U.K. lawmaker. The Shanghai Composite Index climbed as consumer shares paced advances by mainland companies. The yuan headed for the biggest weekly decline in a month.

“Risk appetite is back,” said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management Co. “The market was overly worried about the Brexit issue and there’s still a chance that Britain will stay in the European Union.”

Campaigning for the referendum was halted through Friday after Jo Cox’s death, which was the first killing of a U.K. member of Parliament since the days of Irish Republican terrorism. Chinese stocks tumbled this week amid concern Brexit would disrupt trade relations and after MSCI Inc. refrained from adding mainland shares to its global benchmarks.

MSCI Rejection

The H share index climbed to 8,485.87 at the close. The Shanghai Composite rose 0.4 percent, narrowing this week’s loss to 1.4 percent. The CSI 300 Index advanced 0.5 percent on Friday, while the Hang Seng Index added 0.7 percent.

MSCI, whose emerging-market index is tracked by investors with $1.5 trillion in assets, cited the need for additional improvements in the accessibility of China’s share market and said that it would reconsider inclusion in 2017.

Odds on the U.K. leaving the EU slid to 38 percent after reaching 44 percent on Thursday, according to Oddschecker calculations based on bookmakers’ quotes. Traders noted that an equity rebound in the U.S. coincided with a deterioration in odds of Britons electing to leave the EU, while others said the rally was due given the five-day slide.

Brexit Reaction

Brexit poses unclear economic prospects for Hong Kong, the South China Morning Post reported this month, citing Financial Secretary John Tsang. Chinese President Xi Jinping urged his British counterpart David Cameron to keep Britain in a “united” EU during his October visit to the country, according to British media reports. Billionaire Li Ka-shing, one of the biggest foreign investors in the U.K., said in March he’d scale back investments from the country in the event that Britain exits.

Property developer China Vanke Co. gained 3.4 percent in Hong Kong. China’s statistics bureau is due to release May housing prices on Saturday. CRRC Corp., which was created by the merger of the nation’s two biggest train makers, added 1.5 percent after agreeing with its parent and three other companies to establish a financial leasing firm.

Midea Group Co. added 0.3 percent in mainland trading. China’s biggest appliance manufacturer made a tender offer to raise its stake in German robot maker Kuka AG. Midea is offering 115 euros ($129) a share, contingent on it being able to increase its stake to at least 30 percent, according to an exchange statement.

Wuliangye Yibin Co. and Luzhou Laojiao Co. rose to the highest level in almost a year with share gains of at least 5 percent. Chinese liquor makers will benefit from stable earnings growth and valuation expansion, analysts led by Xing Tingzhi at China International Capital Corp., wrote in a report on Friday.

The yuan fell 0.4 percent this week, the most since May 13, to 6.5889 a dollar in Shanghai, China Foreign Exchange Trade System prices show. It rose less than 0.1 percent on Friday.

— With assistance by Shidong Zhang

(Corrects to remove reference to record odds in seventh paragraph in story published June 17.)
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