Hong Kong’s Stocks Extend Gains to Fifth Day as Shanghai Falters

  • HSBC leads rally for banks; steelmakers decline in Shanghai
  • U.K. vote on EU results are highly uncertain, analyst says

Hong Kong stocks capped a fifth day of gains, led by banks, as Britons began voting on Thursday to decide whether to stay in the European Union. Mainland equities were dragged down by losses for material producers.

The Hang Seng Index rose 0.4 percent at the close. HSBC Holdings Plc, which is listed in London and Hong Kong, posted the longest stretch of gains since August. CNOOC Ltd. paced declines for energy shares. The Shanghai Composite Index slid 0.5 percent for its steepest loss in a week. Shandong Iron and Steel Co. dropped after the Financial Times reported the U.S. will raise duties on some steel products to over 500 percent.

Polling has suggested the vote is finely balanced between the two camps. The former British colony should brace itself for heavy fallout should the U.K. exit the EU, the South China Morning Post reported Thursday, citing Chief Executive Leung Chun-ying.

"Investors think it’s not worth it to make major bets now because the result of the referendum is highly uncertain,” said Shen Zhengyang, a strategist at Northeast Securities Co. in Shanghai. "The A-share market will be less influenced by the results of the U.K. vote as it’s relatively closed."

Banks Advance

The Hang Seng gained 73 points to 20,868.34, paring this year’s decline to 4.8 percent. The five-day advance is the longest winning streak since May. The Hang Seng China Enterprises Index rose 0.3 percent, climbing for a fifth day. The Shanghai Composite extended its 2016 loss to 18 percent, the steepest among 93 global benchmark indexes tracked by Bloomberg.

In Hong Kong, HSBC rose for a fifth day, adding 1 percent. Bank of East Asia Ltd. climbed 1.2 percent. Industrial & Commercial Bank of China Ltd. advanced 1.6 percent. CNOOC halted a three-day, 7.8 percent rally, sliding 0.6 percent.

Hong Kong stocks may suffer in case of Brexit-led turbulence in global markets given the Hang Seng’s high correlation with developed world stock indexes, Credit Suisse Group AG analysts led by Vincent Chan wrote in a note. China’s shares would see limited impact given their weak correlation with major global indexes, a low chance of yuan weakness in the short term and the U.K.’s limited impact on the China economy, analyst Chen Li wrote.

Mainland Shares

Huang Weimin, the hedge fund manager who gained more than 6,200 percent by riding the boom and bust in Chinese stock-index futures last year, expects Britain to vote against leaving, removing the biggest international risk to asset prices. Even the unlikely event of a Brexit won’t derail the ascent of Chinese stocks, he said.

The Shanghai Composite may rally 18 percent next quarter as a delayed rule change for initial public offerings restricts the supply of shares and authorities keep the yuan stable before its official entry into a global basket of reserve currencies in October, Huang said.

A gauge of material producers in the CSI 300 Index dropped 0.9 percent, the most among the 10 industry groups in the broader index, which slipped 0.5 percent. Steelmakers fell, with Shandong Iron and Steel sliding 0.8 percent after the FT report. China Northern Rare Earth Group High-Tech Co. plunged 3.4 percent to lead declines in the gauge. The Economic Information Daily reported that China’s top economic planning body held a meeting to discuss rare earth prices for state reserves.

— With assistance by Tian Chen

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