Hong Kong shares staged a rebound on Wednesday, paring this week's losses as strength in mainland markets spurred buying in Chinese banks and exchange traded funds. Although traders at two large brokerages in Hong Kong said their order books were skewed in favour of buy orders on Wednesday morning despite the weak overseas markets, the buying began in earnest only after the midday break when the Shanghai markets rose.
The Shanghai Composite ended the day at a nearly six-week high after comments from the country's Vice Finance Minister that the economy was on the right track. The benchmark Hang Seng index finished up 1.9 percent while the main index of Chinese firms listed in Hong Kong, the China Enterprises index rose 2.6 percent.
Resilience in Chinese shares despite weakness overseas and healthy inflows into the main China ETF in Hong Kong, suggest a year-end rally was in the offing. "The proximate cause appears to be the sense that we are seeing marginal moves towards easing from China," said a trader at an Asian brokerage, pointing to the rally in railway stocks on signs of government support.
Earlier in the day, assurance on the Chinese economy from China's Vice Finance Minister was welcomed by domestic retail investors who helped the Shanghai Composite reverse course and end the day higher. "The drop in the morning session is largely because of the weak global market," said Chen Yi, an analyst at Xiangcai Securities.
"Investors are now quite confident with the fine-tuning policies in China, especially after the official's comments, so the rebound is not finished yet." Chinese stocks led the rebound in Hong Kong with ICBC, China Mobile, CNOOC and Tencent contributing to nearly two-thirds of the Hang Seng's move up.
Railway counters extended their rally with China Railway Construction Corp up 10.5 percent in Hong Kong and up 6 percent in Shanghai. China Railway Group rose 9 percent in Hong Kong and 5.1 percent in Shanghai. Railway stocks hit multi-year lows in September as a sell-off in Chinese markets from August exacerbated weakness in the sector after a high-speed rail crash in July this year.
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