Hong Kong shares moderately positive at midday, as investors embrace cautious optimism

Hong Kong stocks closed higher at midday on Wednesday, as moderate bargain hunting followed one of the worst single-day shakeouts in local stocks in more than two years, while mainland stocks were down after initial gains.

The Hang Seng Index was up 1.26 per cent, or 386.29 points, to 30,981.71, while the Hang Seng China Enterprises Index rose 0.91 per cent, or 114.83 points, to 12,801.43.

Tuesday saw Hong Kong’s benchmark stock index make its biggest single-day plunge in more than two years, with traders taking cues from a sell-off across Asian markets in a second day of a global equity rout. Wednesday morning’s pullback into positive territory has steadied the market, even as investors remain uncertain over the short-term outlook.

“I don’t think the market has recovered, there are still investor institutions who want to sell into the market rather than hold their stocks,” said Francis Lun, CEO of GEO Securities. “Investors should reduce their holdings. The market has risen quite a lot in the past year and it is time to take profit.”

“Sentiment has changed from unbridled optimism to scepticism,” he added.

All Hang Seng sub-indices were up as trading paused for the lunch hour break.

Oil and gas rose after three days of declines after an industry report was said to show an unexpected decline in US crude prices. China Oilfield gained 2.52 per cent to HK$9.36; Kunlun Energy rose 1.78 per cent to HK$7.43 and Sinopec was up 1.39 per cent to HK$6.54. PetroChina, however, was down by 0.17 per cent to HK$5.8.

Properties rebounded earlier in the morning session from major losses on Tuesday, but were mixed by midday close. Evergrande’s shares were boosted 4.66 per cent to HK$23.60, but Country Garden edged down 0.14 per cent to HK$14.48 and China Overseas dropped 0.7 per cent to HK$28.25.

“What was very unusual about 2017 was that we had very little in terms of a drawdown – the max decline was 5 per cent across emerging markets, which is rare,” said Richard Titherington, chief investment officer, emerging markets Asia Pacific equities, J.P. Morgan Asset Management. “That carried on into January with the market up another 7 per cent or 8 per cent, coming off the back of a long period of abnormally low volatility.”

Adrian Wong, senior associate at BlackRock Investment Institute cautioned that Wednesday’s seeming recovery made for an uncertain short-term outlook.

“Sentiment shifts can stoke market swings,” Wong said.

Investors must take a long-term view, Wong said, adding that the pullback is an opportunity to add risk to portfolios.

Banks were responsible for the lion’s shares of trading turnover. China Construction Bank was up 1.32 per cent to HK$8.43, ICBC edged up 0.12 per cent to HK$7.02 and Bank of China gained 0.06 per cent to HK$4.43.

Hong Kong Exchanges and Clearing gained 2.85 per cent to HK$274.40.

Technology stocks also rebooted to lead the rebound.. AAC Tech was up 5.32 per cent to HK$144.60, while Sunny Optical Technology (Group) rose 3.43 per cent to HK$108.60. Tencent Holdings rose 3.42 per cent to HK$424.00.

“Strong fundamentals around synchronised global growth and moderate inflation still support our core view that risk asset should perform well in 2018,” said Lori Heinel, deputy global chief investment officer, State Street Global Advisors.

The Shanghai Composite Index edged down 0.8 per cent, or 27.21 points, to 3,343.44, while the CSI 300 – which tracks large companies listed in Shanghai and Shenzhen – lost 1.08 per cent, or 44.94 points, to 4,103.95.

The Shenzhen Composite Index made slight losses of 0.06 per cent, or 1.01 point, to 1,725.08, while the ChiNext rose 1.41 per cent, or 22.52 points, to 1,620.64.

All three major US indices rebounded on Tuesday. The Dow Jones Industrial Average finished with a gain of 2.3 per cent, or 567 points, to 24,913, recovering from its biggest single-day points loss. The S&P 500 tacked on 1.74 per cent, or 46.20 points, to 2,695.14 and the Nasdaq Composite was up 2.13 per cent, or 148.36 points, to 7,115.88.

Elsewhere around Asia on Wednesday regional markets were mixed after rebounding earlier. Japan’s Nikkei 225 gained 2.1 per cent, or 451.83 points, to 22,062.07 by midday, South Korea’s Kospi was down 0.4 per cent, or 9.74 points, to 2,443.57, and Australia’s All Ordinaries rose 1.1 per cent, or 63.60 points, to 5,993.80.

Asian markets had ended lower across the board on Tuesday, with the exception of the Laos Composite.