Hong Kong stocks rose 1.82 percent on Wednesday, nearing 3-month highs, as easing concerns over a US rate hike and hopes for an appreciation in the yuan helped lift China issues such as ICBC. The benchmark Hang Seng Index ended 391 points higher at 21,928.77, its strongest close since January 12 this year. The China Enterprise Index of top locally listed mainland Chinese stocks rose 2.3 percent to 12,987, its strongest close since January 11.
Turnover was heavy at HK$89.1 billion, its highest since January 22, as investors returning from a five-day weekend rushed to play catch-up with other global markets. "Market sentiment has improved significantly with the economic data that has been coming out of the US and China," said Contia Hung, head of equity research at Delta Asia Financial Group. "There's also widespread speculation that China may appreciate its currency before Hu Jintao travels to the US next week."
Chinese President Hu will visit the United States to attend a summit on nuclear security and hold talks with US President Barack Obama next week. Separately, a powerful central planning agency said China will keep the yuan basically stable while alerting exporters to potential risks to minimise their losses, in a move pointing to China's readiness to resume appreciation of the yuan.
Minutes from the US Federal Reserve's latest meeting released Tuesday afternoon eased conerns over rising interest rates. This helped boost Chinese banks such as ICBC, the world's largest bank by market value, to a 2-1/2 month high. Smaller rivals such as Bank of China and China Construction Bank both rose more than 3 percent. CNOOC, China's third-largest oil company, rose over 6 percent to a 20-month high. The price of oil was trading near 18-month highs around $87 after a larger than expected drop in US gasoline stockpiles signalled fuel demand was rebounding.
The rising price of oil hit airlines, with China's dominant air carrier Air China bucking the broader market trend to close 1.12 percent down. Exporters fell, hit by fears that a rising yuan could crimp margins, with contract cellphone maker Foxconn down 0.12 percent.
China's main stock index slipped on Wednesday, led by banking and property stocks, under pressure from signs that the government may tighten monetary policies further. The Shanghai Composite Index slipped 0.33 percent to 3,148.222 points, after climbing in the previous session to its highest close in 2-1/2 months.
Central bank adviser Li Daokui was quoted by the official China Securities Journal on Wednesday as saying China may raise interest rates in the second quarter to cool an economy that is expected to grow 9.5 percent this year. "The market still has momentum to rise further because the economy is obviously recovering," said Wu Binhua, strategist at Debon Securities in Shanghai. "But the scope for gains in the index is limited because of concern over further tightening."
He added that the index may consolidate further around resistance at 3,200 points, before rising as high as 3,400 points late this year. Banking sources told Reuters that China's central bank may begin issuing longer-term three-year bills in its open market operations as soon as Thursday, stepping up quantitative tightening to keep inflation in check.
The Shanghai Securities News reported on Wednesday that China's mutual funds raised their average equity allocation to 81.36 percent as of April 1, up 4.89 percentage points from March 25. The index rose more than 4 percent during that period.
Wednesday's turnover fell to 126 billion yuan ($18.46 billion) from the previous day's 144 billion yuan, while falling Shanghai stocks outnumbered gainers by 489 to 400. Property stocks extended the previous session's decline on worries that a renewed surge in real estate prices would prompt a harsher government clampdown.
"The market is expecting more policies ahead to rein in price gains in real estate," said Song Zongqing, analyst at Changjiang Securities. Sector heavyweight China Vanke lost 1.46 percent while state-owned developer Poly Real Estate Group dropped 2.52 percent. Shanghai Pudong Development Bank, partly owned by Citigroup, dropped 0.91 percent after posting a worse-than-expected 5.6 percent rise in 2009 net profit.
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