HONG KONG, July 31: Hong Kong shares rose for a fourth day on Tuesday, poised to end the month with mild gains, as heavyweights such as HSBC advanced ahead of central bank meetings that market players hope will yield further stimulus measures.
Shares of Chinese steel producers also climbed, bouncing for a second day on hopes of more government support for the beleaguered sector.
‘You’re seeing China implementing some steps toward stimulating the economy and at these valuations there’s limited downside,’ said Tom Kaan, a director at Louis Capital Markets in Hong Kong.
By midday, the Hang Seng index rose 0.9 percent to 19,750.1, breaking above its 200-day moving average of 19,661.8, which has provided stiff resistance for the index over the past two months.
The index is up 1.6 percent in July, adding to last month’s 4.4 percent gain as it claws back losses suffered in May when it slumped over 11 percent on fears about the euro zone’s debt crisis and slowing growth in China.
But volumes were light on Tuesday, with many investors reluctant to build fresh positions before Chinese manufacturing data on Wednesday that is expected to show a slight improvement in factory activity, as well as ahead of U.S. Federal Reserve and European Central Bank policy meetings this week.
‘At the moment, the market seems to have lost its conviction that China will once again become a driver of global growth and more importantly global demand,’ said Kaan.
Chinese indices continued to underpeform the rest of Asia with the large-cap focused CSI300 up 0.2 percent and the Shanghai Composite down 0.1 percent.
Trading activity has been choppy in Hong Kong all month with low valuations prompting some bargain-hinting but a persistent stream of profit-warnings from Chinese companies also prompting short-selling.
The Hang Seng currently trades at 9.5 times forward 12-month price-to-earnings, according to Thomson Reuters I/B/E/S representing a 23 percent discount to its average multiple over the past decade.
Over the past month earnings forecasts have been cut by an average 1.8 percent for the Hang Seng in the sharpest downward monthly revision since March 2009.
Shares of HSBC Holdings rose 0.8 percent providing the biggest boost to the index followed by the 1.8 percent rise in China Construction Bank.
HSBC, Europe’s largest lender, reported first-half results largely in line with expectations but said it would set aside $2 billion as provisions for ongoing investigations related to money laundering in the U.S. And mis-selling in the U.K.
Railway stocks bounced in Shanghai following a plan to boost private sector investments with China Railway Construction and China Railway both up nearly 4 percent.
Among the large-caps, shares of Petrochina rose 0.9 percent and ICBC gained 1.1 percent.
Gains for steelmakers came after the China Iron and Steel Association appealed to the government to restore a value-added tax rebate on some high-end steel products to bolster the sector hit by slumping profits and over-capacity.
Angang Steel shares rose 4 percent while smaller rival Maanshan Iron rose 5.3 percent on healthy volumes. (agencies)
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