Hong Kong Market gains 0.27%

Headline shares of the Hong Kong financial market closed higher on Wednesday, 16 January 2019, as investors continued hunting for risk assets after China's government moved to inject more life into its economy by cutting taxes and increasing spending. Market gains were, however, capped in the wake of news of a crushing Brexit defeat in parliament for UK Prime Minister Theresa May. At closing bell, the Hang Seng Index added 71.81 points or 0.27% to 26,902.10. The Hang Seng China Enterprises Index rose 52.90 points or 0.5% to 10,555.52. Turnover decreased slightly to HK$87.5 billion from HK$89 billion on Tuesday.

Investors risk sentiments were encouraged amid fresh round of stimulus promise including tax cuts from China's top economic planning body and the finance ministry on Tuesday. China's leaders plan to reduce taxes, increase government spending, and provide financing to private and small enterprises in a bid to strengthen the world's second-largest economy. China is enduring its worst slowdown since the global financial crisis, partly because of a punishing tariff dispute with the U.S.

The Chinese government will implement larger tax and fee cuts, especially for small businesses and the manufacturing sector, according to a press conference on Tuesday, 15 January 2019. The press conference was held in Beijing with Zhu Hexin, deputy governor of the People's Bank of China, Xu Hongcai, assistant minister at the Ministry of Finance, and Lian Weiliang, vice chairman of the National Development and Reform Commission (NDRC). The officials were outlining plans for 2019 that were set at an annual policy meeting in December. China will avoid a flood of liquidity, and will maintain a stable macro-leverage ratio, the central bank's Zhu said. The central bank will also work more to improve policy transmission and guide funding costs lower, he said. Being prudent doesn't mean the central bank can't tweak monetary policies, Zhu said, adding that China's policy will offer enough support to the economy. Zhu also said the People's Bank of China was confident it can keep the value of the yuan steady.

China's new yuan loans in 2018 was increased 2.64 trillion yuan (US$382 billion) from the previous year to 16.17 trillion yuan, according to a statement by the central bank before the press conference, signaling that December lending exceeded most economist estimates. China's loans to small and medium-sized enterprises rose 17.1% in the January-November period over a year ago, according to the central bank statement.

China will take measures to stabilize auto consumption, according to a statement by the NDRC at the press conference. Stabilizing employment is the government's top priority, Lian Weiliang, vice chairman of NDRC said at a press conference. China will speed up investment projects and local government bond issuances, but will not resort to flood-like stimulus, Lian said. In the July-September period, China's economic growth sank to a post-crisis low of 6.5% compared with a year earlier. China has lowered the level of reserves that commercial banks need to set aside for the fifth time in a year and has also cut taxes and fees, and stepped up infrastructure investment to shore up the economy.

Shares of pharmaceutical players inclined after Citi published a research report stated pharmaceutical counters were severely undervalued. Sino Biopharmaceutical (01177) soared 7.9% to HK$5.85. Livzon Pharmaceutical (01513) shot up 5.6% to HK$23.75. CSPC Pharmaceutical (01093) climbed 5.4% to HK$12.56. Guangzhou Baiyunshan Pharmaceutical (00874) jumped 4.8% to hK$30.45.

Shares of smartphone component suppliers declined, amid worrying signs including Apple's recent blaming of China for slower sales growth. AAC Technologies fell 2.5 per cent and Sunny Optical declined 2.7 per cent. Chinese smartphone and home appliances maker Xiaomi fell 2.4 per cent on reports that an investor sold 231 million class B shares at HK$9.45 per share. Q Technology, a smartphone camera module maker that supplies Xiaomi, plummeted 6.7 per cent, after issuing a warning that its net profit may have plunged by 95 per cent in the last year because of a combination of factors, including slow upgrading of products and yuan depreciation.

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