Hang Seng Index hits high as Tencent share price rises

Hong Kong’s financial markets received a lift on Monday, 14 January, led by the Hang Seng Index, amid growing anticipation surrounding the Sino-American trade deal signing.

The stock indicator had closed at 28,954.94 – its highest finishing since May 2019 – boosted by share price jumps of China Construction Bank, Ping An Insurance Group, and Tencent Holdings at 1.2%, 2.6%, and 1.5% respectively.

Comparatively, the Shanghai Composite Index over on the mainland gained 0.76% for the day.

Fund managers and investors across Asia markets have been reacting to new updates that China will reportedly buy an estimated US$200 billion worth of American exports over the next two years, as part of the phase one trade deal, due to be signed on Wednesday (15 January) in Washington D.C.

BYD, Chow Tai Fook, and Tencent shares soar

In terms of equities, the day’s largest gains were made by Chinese electric vehicle maker Byd Co Limited, which soared nearly 16% from Friday’s close, after Chinese officials indicated that they will not enact subsidy cuts for new energy vehicles this year. On Monday, the company also appointed a former General Motors exec as senior chair adviser.

Hong Kong-founded jewellery conglomerate Chow Tai Fook Jewellery Group saw share price rise 3.1% on Monday’s market after it reported Q3 same-store sales growth of two percent for mainland China.

The Hang Seng’s largest listing – Chinese internet group Tencent Holdings Limited – traded at an 18-month peak of US$400.80 per share by Monday afternoon, before closing above US$405.

‘Triple-short covering’ keeping equities up

One reason why the equity market continues to fare well is because of a ‘triple-short covering’ that is lifting stock prices higher, according to Jefferies Financial Group strategist Sean Darby.

Improved sentiment toward the Chinese yuan, interest rates, and initial public offerings have forced investors to cover any short positions, he wrote in a note.

‘While domestic political issues are still present, the shift in currency and interest-rate markets is overwhelming any pessimism over the economy,’ wrote Darby.

On Monday night, the US Treasury also removed the ‘currency manipulator’ label that it had placed on China last August. This immediately pushed the Hang Seng Index up 0.32%.

Chinese officials are in the US capital this week to sign the phase one trade deal.

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