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Hong Kong - A gauge of Chinese stocks in Hong Kong headed for the biggest monthly gain among global peers as Bank of China to Ping An Insurance (Group) reported better-than-estimated earnings and investors speculated central banks would keep adding to stimulus.
The Hang Seng China Enterprises Index is up 6.9% in August, the most among 94 benchmark equity gauges tracked by Bloomberg. Banks and insurers have led the the advance, with Industrial & Commercial Bank of China surging 13%, while automakers declined.
The gauge fell 0.3% on Wednesday at 07:27. The Shanghai Composite Index added 0.3%, poised for a third monthly advance in a row.
With China’s earnings season all but complete, 71% of companies included in the H-share gauge beat profit estimates, and 55% topped sales forecasts.
Still, the nation’s economic slowdown is weighing on earnings, with analysts projecting net income at the gauge’s members will decline 14% in the current quarter. The equity rally stumbled in the second half of August amid concern higher borrowing costs in the US will renew pressure on the yuan and Hong Kong’s property market.
“A mixed bag of better earnings and the Shenzhen stock connect drove gains this month,” said Andrew Clarke, Hong Kong-based director of trading at Mirabaud Asia.
“Whilst the market has had good gains, volumes have been on the low side. A lot of traders will come back from the summer break and the trend will be higher for September at least even as there will be some down days.”
Property gains
The Hang Seng China Enterprises Index was last at 9 571.95, while the Shanghai Composite Index took its gain this month to 3.5%.
A gauge of property shares on the mainland surged 12% in August after stake purchases by China Evergrande fueled optimism of more mergers and home prices in the largest cities climbed. The Shenzhen Composite Index advanced 4.6%, buoyed by the approval of an exchange trading link with Hong Kong.
Volatility on the Shanghai Composite has fallen to a two-year low as the country’s housing boom lures speculators - new home prices in Shanghai jumped 27% in July from a year earlier. The stock gauge hasn’t moved more than 1% on a closing basis for two weeks, a far cry from the first half of the year when 2% daily swings were regular occurrences.
The link between equity markets in Hong Kong and Shenzhen is expected to start in mid- to late November, China’s markets regulator said Tuesday. The long-awaited program was officially approved on August 16.
ICBC headed for its best month since April 2015. The stock shed 0.2% on Wednesday after reporting a one-percent profit growth in the second quarter and the first decline in its bad-loan ratio since 2012. Bank of China climbed 1.5%, taking this month’s gain to 9.7%.
The lender reported a 3.4% increase in second-quarter profit even after setting aside extra provisions to boost its bad-loan buffer.
Dongfeng has shed 13% this month, the worst performance on the Hang Seng China Enterprises Index, after the carmaker reported a decline in first-half earnings and didn’t propose an interim dividend. BOC Aviation has jumped 8.4% as the aircraft leasing unit of Bank of China posted a 24% increase in first-half profit.
Evergrande fell more than 5% on Wednesday after China International Capital wrote in a report that its net gearing of more than 400% may hurt shareholders’ return. That pared this month’s gain to 11%. China Vanke added 1.7% after Nexus Capital Management bolstered its stake in the company. The developer has risen 15% in August, the most on the Hang Seng China Enterprises Index.
