Hong Kong shares rose on Thursday, extending their weekly gains to over 5 percent as broad buying of large caps, in particular laggard financials, by funds helped lift the market. Hong Kong's benchmark Hang Seng rose 0.5 percent, supported for a second day by heavyweight HSBC Holdings Plc, which climbed 1.4 percent on nearly four times its average 30-day traded volume.
"We're seeing large programme inflows into the region," said a Hong Kong-based trader at a large US investment bank referring to trading in an entire portfolio of stocks rather single stocks, often done electronically. Mainland banking counters, which have lagged the broader market, were seen catching up as healthy turnover on the Hong Kong stock exchange suggested the latest gains had momentum.
While HSBC provided the biggest boost to the broader market, China Construction Bank Corp rose 1.4 percent, and ICBC, gained 1.5 percent, helping the financial sub-index outperform the benchmark. China's largest lender, ICBC, said it would not conduct further fundraising from the capital markets within three years, the Securities Times reported, citing the bank's chairman.
Still, concerns about the exposure of mainland banks to local government funding vehicles and the impact of weakness in the property market are likely to keep the sector under pressure. "We still don't know how these banks will perform in a credit down cycle, so there's no real way to tell which banks are the really weak ones," said Nicholas Yeo, head of China and Hong Kong equities at Aberdeen International Fund Managers.
Yeo said he preferred Hong Kong-based banks such as Standard Chartered Plc and Wing Hang Bank Ltd, both of which are among the top holdings in his portfolio. Bucking the broader bullish trend, shares of companies whose margins were at risk due to rising food prices fell, such as Tsingtao Brewery which closed 2.7 percent lower.
Tsingtao, founded by German settlers in China over a century ago and which imports barley from flood-affected Queensland in Australia, has been hit by rising barley as well as sugar prices. China's key stock index closed 0.2 percent higher supported by strength in oil firms as US crude extended gains to under $92 a barrel, but thin volumes showed investors were cautious ahead of a series of upcoming economic data.
The benchmark Shanghai Composite Index rose to 2,827.7 points, extending a 0.6 percent rise on Wednesday. The index is nearing the key technical 250-day moving average level at 2,831 points. "There are too many uncertainties around the market, such as economic data, which may lead the market to remain quiet for now," said Zhang Yanbin, an analyst at Zheshang Securities in Shanghai.
Analysts widely expected the index to move in a narrow range around the key level of 2,800 points in the near term. Petrochina Co, the largest company on the Shanghai stock exchange by market value, rose 1.3 percent while China Petroleum & Chemical Corp gained 2 percent. Software companies also outperformed after China's state council said it was planning new measures to promote the software and integrated circuit industries.