Hong Kong Market extends gain ahead of Fed meeting

Headline indices of the Hong Kong share market closed higher on Monday, 18 March 2019, with investor sentiment brightened by report about substantial progress in U.S.-China trade negotiations as well as indications of more Chinese economic stimulus. Meanwhile, risk sentiments boosted further on expectations the Fed will point to just one rate hike in 2019 when it meets later this week. At closing bell, the Hang Seng Index advanced 396.75 points or 1.37% to 29,409.01. The Hang Seng China Enterprises Index added 166.66 points or 1.45% to 11,674.83. Turnover decreased to HK$116.9 billion from HK$121.5 billion on Friday.

The Chinese government has additional monetary policy measures that it can take to support economic growth this year, and will even cut "its own flesh" to help finance large-scale tax cuts, Premier Li Keqiang said on Friday. Li's comments suggest Beijing is ready to roll out more stimulus measures to ensure the economy grows within a targeted range of 6-6.5%.

 

The Fed's next meeting will be closely followed in hopes it will give an idea about its plans for interest rates, with some observers suggesting it will pare its pace of hikes in the face of a slowing global economy. With inflation still tame as US growth decelerates, economists also say the central bank will lower the number of hikes they expect this year, from the two projected in December, while there is even talk of a possible cut at some point.

Fed Chairman Jerome Powell is due to announce the second policy decision of the year on Wednesday by the rate-setting Federal Open Market Committee. The benchmark interest rates is now in a range of 2.25 to 2.5% and futures markets see no more rate hikes in 2019.

A slew of other central bank gatherings, including the Bank of England, will give further clues on monetary policy.

On the trade front, top officials from the world's biggest economies working on an agreement to end their long-running tariffs spat, which was a major drag on markets at the end of 2018. While there are few details on the talks as they stand - and a floated summit between Donald Trump and Xi Jinping looks to be later than expected - upbeat comments from both sides are keeping investors broadly happy for now.

Blue chips were mostly higher. CNOOC (00883) softened 1% to HK$14.02, becoming the worst blue-chip loser, after JP Morgan downgraded its rating to "neutral". China Resources Land (01109) soared 9.1% to HK$34.05, becoming the best blue-chip winner. Tencent (00700) advanced 2.7% to HK$368.8 ahead of its earnings report on Thursday. HSBC (00005) edged up 0.4% to HK$65.1. HKEX (00388) gained 2.1% to HK$280.6. China Mobile (00941) added 1.1% to HK$8692. AIA (01299) put on 0.7% to HK$79.05.

Chinese developers were also higher, boosted by strong Renminbi. China Overseas Land & Investment (00688) surged 7% to HK$30.45. JP Morgan tipped that some Chinese developers may report stronger-than-expected earnings. Agile Group (03383) jumped 10.7% to HK$12.62. China Vanke (02202) shot up 7.1% to HK$32.35. Longfor Group (00960) rose 4.1% to HK$25.35. CIFI Holdings (00884) soared 8.8% to HK$5.95.

WH Group (00288) added 5.3% to HK$8.22 after it reported 2018 earnings on Friday. China Yurun Food (01068) plunged 6.4% to HK$1.91 as it issued profit warning expecting a loss of not less than RMB4.7 billion. COFCO Meat (01610) soared 7% to HK$3.03.

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