Shares in Hong Kong gained for a fourth consecutive session on Friday to close at a one-month high, as upbeat earnings from US economic bellwethers such as 3M Co helped boost sentiment. The benchmark Hang Seng Index ended Friday up 1.1 percent at 20,815.33, its strongest close since June 23. The China Enterprise Index of top locally listed mainland companies was up 1.37 percent at 11,915.58.
"This looks like a sustainable rally to me now," said Conita Hung, head of equity research at Delta Asia. "We're seeing some very strong support at about 20,000, and I don't see things falling below it right now." Hong Kong's stock market has risen almost 10 percent from a low of 18,971 in May, hit by worries about potential moves by Beijing to cool the Chinese economy and concern about fresh fundraising plans by the country's banks.
Signals were mixed on the charts, although Hong Kong's Relative Strength Index reading is moving up towards overbought territory. The high correlation with the S&P 500 has also come down dramatically, implying that US stock movements now have a smaller impact on the Hang Seng Index. However, the correlation with the Shanghai stock index continued to trend upwards to 0.89, suggesting that the two indexes now move almost in tandem. A reading of 1 is a perfect correlation. Agricultural Bank of China was the session's most active issue with more than 1 billion shares changing hands. It ended up 5.5 percent after Morgan Stanley raised its H-share holding by about 1 percentage point.
AgBank's Shanghai-listed shares also rose, climbing 2.9 percent. Other banks to gain included index heavyweight HSBC Holdings, up 1.3 percent, and Industrial and Commercial Bank of China, up 1.2 percent. Bucking the market trend, China Foods fell more than 10 percent intraday to a one-month low after saying it expected a 40 percent decline in first-half net profit because of a substantial decrease in income from its wine business. It closed Friday down 3.8 percent.
China's key stock index ended up 0.38 percent on Friday, a fifth session of gains to its biggest weekly increase since last December, amid signs that institutional investors remain interested in banking shares. The Shanghai Composite Index ended at 2,572.028 points, finishing the week up 6.1 percent. Gains were aided by improving liquidity in China's money market and expectations for an easing of government curbs on the property market. The index offset the potential impact of China Everbright Bank's initial public offering, which comes up for review next Monday, adding more shares to the market. ICBC gained 1.4 percent, while China Minsheng Banking Corp was 1.3 percent higher.
Turnover rose to 101 billion yuan ($14.9 billion), from 96 billion yuan on Thursday. Improving sentiment has boosted volume this week, with analysts saying higher volumes could indicate an upward trend for the index. Losing shares outnumbered gainers 541 to 341.
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