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Tuesday, August 30, 2016, 21:04

Shenzhen link’s early kick-off buoys bourse

By Lin Wenjie
Shenzhen link’s early kick-off buoys bourse
A receptionist at her desk at the Hong Kong Stock Exchange in Central. The upcoming Shenzhen-Hong Kong Stock Connect marks another major step forward in the Chinese mainland’s efforts to open its markets to the global financial community. (Edmond Tang / China Daily)

News that the much-heralded Shenzhen-Hong Kong Stock Connect will be launched earlier than expected helped push Hong Kong’s benchmark stocks gauge to its highest level in nearly two weeks on Tuesday.

The Hang Seng Index (HSI) surged by 0.85 percent and past the 23,000-point mark for the first time since Aug 18 this year, as investor sentiment rose on an announcement in Beijing that the connect — the second stocks trading link between Hong Kong and the Chinese mainland — will be in play between mid- and late November instead of December as anticipated.

However, market pundits have been quick to warn that the news might not be an indicator for a sustained upward climb as much of the excitement has more or less been digested, with the next US interest-rate hike on the horizon.

The HSI picked up 194.77 points, or 0.85 percent, to close the day at 23,016.11 on market turnover of HK$60.87 billion — up 12.5 percent on Monday’s.

Banking and “through train”-related stocks stole the show, with Industrial & Commercial Bank of China rising 1 percent and heading for its best month since April last year, while Bank of China made its biggest daily advance in two weeks. The Hang Seng China Enterprises Index rose 99.43 points, or 1.05 percent, to 9,597.25 points.

According to a China Securities Regulatory Commission press briefing in Beijing on Tuesday, it’s all systems go for the Shenzhen-Hong Kong link’s kick-off which will be earlier than the market’s projection of December, while technical preparations will take place from August to November, according to media reports.

A spokeswoman for Hong Kong Exchanges and Clearing — the city’s bourse operator — confirmed the time frame, saying the second “through train” is all set for a November start.

“Market sentiment was lifted by the news, but I don’t think today’s growth signals an upward trend, as the market turnover is just at an average level,” said Hannah Li Wai-han, a strategist at UOB Kay Hian Hong Kong.

She said the market’s speculative atmosphere with regard to the new link had eased, compared to the launch of the Shanghai-Hong Kong Stock Connect in November 2014, indicating that investors’ hopes for the Shenzhen link are not as high as those for the Shanghai link.

The Shenzhen connect marks another major step forward in the mainland’s efforts to open its markets to the global financial community.

“Hong Kong’s market outlook is somewhat mixed in the short term, but I think the downward pressure is greater than the upward momentum because many favorable factors had already been discounted by now, such as interest-rate cuts by global central banks and the favorable market sentiment. But, some negative factors have yet to be taken into account, such as a fresh US interest-rate hike, which will probably drag down the Heng Seng Index,” Li said, adding that companies with excellent interim performance, securities companies and new economies are among her favorite picks.

She noted that US Federal Reserve Chairwoman Janet Yellen has hinted at a US rate rise by the end of the year, and the Fed will hold its next rate-setting meeting on Sept 20 and 21, so investors need to pay close attention to the Fed’s attitude on interest-rate movements.
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