Hong Kong Stocks Post Biggest Gain in Month as Brexit Odds Drop

  • Lower chance of Brexit will boost risk appetite, analyst says
  • Vanke declines as share-sale plan opposed by China Resources

Hong Kong’s stocks posted their steepest gain in almost a month as rising optimism that Britain will vote to remain in the European Union spurred increased risk appetite for global equities.

The Hang Seng Index rose 1.7 percent at the close, led by real-estate and oil companies. Wharf Holdings Ltd. and CNOOC Ltd. advanced at least 2.5 percent. HSBC Holdings Plc, which Jefferies Group LLC named as among the most exposed to Brexit, jumped the most in a month.

Chinese and Hong Kong government officials as well as business leaders have warned about the risks of Brexit. Bookmakers’ odds of the U.K. voting to exit the 28-nation bloc fell to about 31 percent Monday, with the poll from Survation for the Mail on Sunday newspaper showing 45 percent of people backed the “Remain” camp, while 42 percent supported “Leave.”

"The lower possibility for the U.K. to leave the EU reduced the probability for significant fund outflows from Hong Kong and increased the demand for risky assets," said Li Bo, chief investment consultant at GF Securities Co. in Shanghai.

Brexit Reaction

The Hang Seng Index rose for a second day to 20,510.20, while the Hang Seng China Enterprises Index advanced 1.8 percent. The Shanghai Composite Index erased losses to close 0.1 percent higher.

Hong Kong’s benchmark index has fallen 6.4 percent this year, compared with an 18 percent slump for its Shanghai counterpart. The Hang Seng trades at 10.7 times projected 12-month earnings, compared with 12.5 for the mainland gauge.

Brexit won’t have a direct impact on Hong Kong even though the vote will cause volatility in financial markets, Radio Television Hong Kong reported Monday, citing the city’s Secretary for Financial Services and Treasury K.C. Chan. Chinese President Xi Jinping urged his counterpart David Cameron to keep Britain in a “united” EU during his October visit to the country, according to British media reports.

Brexit Plays

HSBC. which is based in London, surged 3.5 percent. The lender, Esprit Holdings Ltd. and Cosco Pacific Ltd. are among Hong Kong-listed companies with the highest correlation between their share prices and pound moves, Jefferies chief global equity strategist Sean Darby wrote in a note, adding that he expects the U.K. to vote to remain in the EU on June 23. Esprit dropped 1.7 percent, while Cosco Pacific gained 1.3 percent.

Cheung Kong Property Holdings Ltd. added 2.5 percent. Hong Kong’s secondary private residential property prices rose 0.35 percent in the week ended June 12 from the previous week, the Centaline Property Agency said on its website.

China Petroleum & Chemical Corp., Asia’s biggest refiner, climbed 3.1 percent. Oil gained for a second day above $48 a barrel as the dollar retreated, boosting the appeal of commodities priced in the U.S. currency.

China Vanke Co. dropped 3 percent. Chairman Wang Shi’s bid to fend off a takeover has been thrown into doubt after the property developer’s second-largest shareholder, China Resources (Holdings) Co., said the proposal failed to get enough votes from the board.

Goldin Shares

Chinese new-home price excluding government-subsidized housing climbed in 60 cities in May, down from 65 in April, among the 70 tracked, the National Bureau of Statistics said Saturday. The recovery in home prices abated as local governments put curbs in top economic centers like Shanghai and Shenzhen where prices have been surging, while they deployed home-buying stimulus in smaller cities to clear a glut of unsold residences.

Goldin Financial Holdings Ltd. and Goldin Properties Holdings Ltd., two companies controlled by Pan Sutong, will be dropped from the Hang Seng family of indexes as of June 30 because of their high shareholding concentration that has contributed to wide swings in the stocks.

The two companies have been the subject of a series of notices from Hong Kong’s securities regulator flagging the issue. Pan and entities controlled by him own about 64 percent of Goldin Properties’ shares and almost 68 percent of Goldin Financial’s stock, according to data compiled by Bloomberg. Goldin Financial rose 0.8 percent, while Goldin Properties declined 1.2 percent.

— With assistance by Tian Chen

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