Hong Kong Stocks Rise Above Key 26,000 Level as Banks Advance

  • City’s benchmark may test new highs if it stabilizes: analyst
  • Volatility near highest since November, up from two-year low

Hong Kong stocks rose for a third day, closing above the key 26,000 level for the first time in more than a month, as banks led the gains.

The Hang Seng Index advanced 0.6 percent to 26,043.64 at the close. Banks accounted for the benchmark’s top three gainers, with Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp. rising at least 2.5 percent to lead the rally. The Shanghai Composite Index declined 0.2 percent to cap a third day of losses, the longest streak in more than two months.

Improving Chinese economic figures and earnings have helped Hong Kong’s benchmark rise every month in 2017. Gains in the gauge stalled in June after it failed to remain above the 26,000 level. That sent volatility to a two-year low before recovering this week to near the highest since November amid a rally in Chinese financial shares.

"The market is recovering from the selloff last week, with banks and insurers leading gains amid easing concerns over liquidity after central bank injections," said Linus Yip, a Hong Kong-based strategist with First Shanghai Securities. "The index may consolidate around the 26,000 level and test new highs if it stabilizes."

A gauge of China’s small-cap shares closed 0.2 percent higher, reversing losses of as much as 1.1 percent and snapping a three-day losing streak. Analysts and fund managers pinned the earlier declines on factors including concern China’s deleveraging campaign will intensify and worries that first-half earnings may not support the stocks’ high valuations.

  • The People’s Bank of China resumed its open-market operations Tuesday for the first time in 13 days, offering a total of 40 billion yuan in reverse-purchase agreements. It injected another 70 billion yuan into the banking system on Wednesday.
  • This week’s bank rally was seen to get new support after the nation’s banking regulator told Xinhua News that overall risk in the sector is "under control." CBRC Vice Chairman Wang Zhaoxing’s tone in Tuesday’s Xinhua report shows regulators will probe risks and regulate banks’ behavior at a "gradual pace" instead of with "shock therapy," said Shujin Chen, chief financial analyst at Hua Tai Securities.
  • China gas firms jumped as CICC lifted target prices for stocks in the industry, citing a solid growth outlook, in a note Wednesday by analysts including Bin Guan. China Resources Gas Group Ltd. and China Gas Holdings Ltd. rose at least 4.7% to record highs, while ENN Energy Holdings Ltd. advanced 2.8% to the highest since May 2015.
  • Lomon Billions Group Co. advanced 5.1% to close at a record high after boosting its profit forecast, citing a better-than-expected rise in the price of its main product, titanium dioxide. Prices should continue to rise after the peak season begins in September, further boosting the company’s earnings growth, CICC analyst Zhuojing Tang wrote in a note Wednesday.

— With assistance by Amanda Wang

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