Hong Kong and China shares ended a tough month on a positive note on Thursday on hopes that a turnaround in Chinese shares can last, supported by valuations and anticipation of solid corporate earnings. Helping shares in Hong Kong was short-covering ahead of a long weekend, as Friday is a public holiday.
Markets in Hong Kong and Shanghai have underperformed Asian peers in the second quarter after outperforming most of them in the first three months. Weighing on the two markets have been fears of escalating inflation, slowing growth in the Chinese economy and shady corporate governance practices among some Chinese firms.
With investigations into alleged abuses under way plus data suggesting that fears of a hard landing in China could be overblown, some analysts feel the tide is turning. A Reuters poll on Thursday showed that in June, mutual funds in China raised their recommended equity weightings to an eight-month high. The benchmark Hang Seng Index closed up 1.5 percent at 22,398.1 points on Thursday, which left it down 5.4 percent for the month, its worst June performance in three years. The index is down 2.8 percent so far in 2011.
In a bullish sign, gains on the day came in accelerating turnover, which rose to HK$74 billion, 7 percent more than the 20-day average. HSBC Holdings Plc was the top boost for the benchmark index, closing up 1.5 percent on easing worries over the eurozone's banking sector after Greece lawmakers voted for a five-year austerity plan. The stock hit a roadblock at the HK$78 level, its March low, now seen as stiff resistance. So far this year, shares of HSBC are down 3.3 percent.
China shares recorded their first monthly gain in three months, boosted by large cap plays with institutional names seen cautiously optimistic on China's growth outlook in their end-of-month window dressing. The benchmark Shanghai Composite Index finished up 1.2 percent to 2,762.1 points, ending the second quarter down 5.7 percent. It is down 1.6 percent year-to-date.