Hong Kong Market surges as trade progress, Shenzhen plan boost sentiment

The Hong Kong share market finished sharp higher on Monday 19 August 2019, as risk sentiments underpinned after a move by People Bank of China (PBOC) to change the way a key interest rate benchmark is set. Meanwhile, sentiments were further boosted up after Chinese government on Sunday announcement a plan to transform Shenzhen, which neighbors Hong Kong, into a global businesses hub and a signal from US president Donald Trump that there is progress toward a trade deal. At closing bell, the Hang Seng Index advanced 2.17%, or 557.62 points, to 26291.84. The Hang Seng China Enterprises Index rose 1.45%, or 144.85 points, to 10,109.15.

The People's Bank of China (PBOC) on Saturday unveiled key interest rate reforms to help steer borrowing costs lower for companies and support a slowing economy caught in the grip of a bruising trade war with the United States.

Investors were also encouraged by the potential for improvement in US-China trade relations after White House chief economic adviser Larry Kudlow said that if talks between deputies from Beijing and Washington went well and "we can have a substantive renewal of negotiations" then "we are planning to have China come to the USA and meet with our principals to continue the negotiations". He added that high-level phone talks last week were "a lot more positive than has been reported". Trump provided further cause for hope by tweeting: "We are doing very well with China, and talking." Kudlow also raised the prospect of using cash taken from higher tariffs on Chinese goods to pay for tax cuts.

China central government published opinions supporting Shenzhen to build a pioneer demonstration zone of socialism with Chinese characteristics, which boost both China and Hong Kong stock markets.

Blue chips rose across the board. HSBC (00005) added 2.6% to HK$57.95. HKEX (00388) bounced 3.2% to HK$252.8. Tencent (00700) rose 3.2% to HK$332.8. China Mobile (00941) inched up 0.3% to HK$66.25. AIA (01299) put on 3% to HK$78.25.

Chinese developers with Shenzhen exposure soared on the news of "pioneer demonstration zone". Shenzhen International (001152) jumped 7.7% to HK$15.06. Shenzhen Investment (00604) spiked 11.2% to HK$2.88. Kaisa Group (01638) soared 14% to HK$2.93. KWG Group (01813) surged 6.3% to HK$6.45. Agile Group (03383) shot up 6.4% to HK$10. China Aoyuan (03883) climbed 9.5% to HK$10.4. Sunac China (01918) gained 5.2% to HK$34.45.

Chinese drug maker CSPC Pharmaceutical Group rose 4.2% to HK$12.96, after reporting a 25% jump in first-half profit to 1.9 billion yuan (US$269 million).

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