Hong Kong stocks rose to the highest level in five weeks, led by property developers and energy companies, after Federal Reserve Chair Janet Yellen reiterated her intention to raise interest rates only gradually and commodities entered a bull market.
The Hang Seng Index advanced 0.9 percent, climbing for the 10th time in 11 days. The city’s benchmark index surpassed the 200-day moving average for the first time since July 2015. A gauge of mainland shares in Hong Kong increased for an eight day for the longest winning streak since April 2015. The Shanghai Composite Index slipped for a second day before the scheduled release of foreign-reserves data.
Hong Kong stocks have also rallied amid speculation the Chinese authorities will soon announce the start date for an exchange link with Shenzhen. Commodities ended a five-year rout as supply constraints drove up prices in everything from soybeans to zinc, while futures indicate that the odds of borrowing costs being raised next month are 22 percent, down from more than 50 percent last week. Hong Kong’s monetary policy tracks move in the U.S.
“The rebound in Hong Kong stocks is motivated by ongoing talk of imminent start of the Shenzhen connect,” said Ronald Wan, Hong Kong-based chief executive at Partners Capital International. “More importantly, the prospect that the Fed’s rate hike may not come so soon has stimulated demand for stocks.”
A weaker yuan has also spurred mainland traders to seek shelter in the city’s equities. They bought a net 21.9 billion yuan ($3.3 billion) of shares listed on the Hong Kong stock exchange in May, the most since April 2015. The Hang Seng’s 7.2 percent rally in the past two weeks has driven its relative-strength index to 67.2, near overbought conditions.
Mainland equities dropped before a slew of economic data this week. A report due Tuesday will probably show China’s foreign-exchange reserves fell to $3.2 trillion in May from $3.22 trillion in the prior month, according to the median estimate in a Bloomberg survey of analysts. Data the following day will likely show overseas shipments dropped 4 percent, compared with a 1.8 percent decline in April. Reports last week showed an official factory index stood at 50.1, around the line between expansion and contraction, while a non-manufacturing gauge fell from the previous month.
--With assistance from Kana Nishizawa To contact the reporter on this story: Kyoungwha Kim in Hong Kong at kkim19@bloomberg.net. To contact the editors responsible for this story: Richard Frost at rfrost4@bloomberg.net, Allen Wan
©2016 Bloomberg L.P.
