💎 Fed’s first rate cut since 2020 set to trigger market. Find undervalued gems with Fair ValueSee Undervalued Stocks

HK,Shanghai shares track Asia mkts higher; banks up

Published 11/11/2010, 12:04 AM
Updated 11/11/2010, 12:16 AM

* Hong Kong rises 1.09 percent; Shanghai up 0.63 percent

* Banks higher in Hong Kong on China rate rise expectations

* Coal mining issues lift Shanghai market (Updates to midday)

By Jun Ebias and Farah Master

HONG KONG/SHANGHAI, Nov 11 (Reuters) - Shares in Hong Kong and Shanghai were higher by midday on Thursday, tracking gains in other Asian markets, while Moody's Investors Service upgrade of China's sovereign debt rating further lifted sentiment.

Investors shrugged off the higher bank reserve requirement announced by Beijing late on Wednesday, with banks trading higher in Hong Kong.

Moody's raised China's rating to Aa3, four steps below its highest rating, from A1, citing the country's solid economic fundamentals.

"The rating upgrade is an affirmation of China's stable economic outlook, which will be positive for corporate earnings going forward," said Belle Liang, research head at Core Pacific-Yamaichi. "People had been expecting the reserve ratio increase, so last night's announcement was not a surprise."

The benchmark Hang Seng Index was up 1.09 percent at 24,767.53, snapping two sessions of losses.

Chinese banks were higher on expectations Beijing will raise its policy rate for a second time this year after inflation accelerated to a 25-month high in October, lifting interest margins.

"Banks have excess reserves, so this kind of increase (in reserve ratios) doesn't affect their earnings at all," said Alex Au, who helps manage more than $300 million as managing director at Richland Capital. "In the next few months, there will be more interest rate rises coming. If that happens, it will be good for banks because their earnings are positively correlated to interest rates."

Banks could charge higher rates on loans, but may not have to pay higher rates on a large pool of deposits, raising their interest margins, Au said.

Industrial and Commercial Bank of China Ltd rose 2.3 percent, spurred also by the announcement of the details of its $6.8 billion fundraising plan.

GOME Electrical Appliances Holding Ltd rose 13.9 percent on hopes the dispute between its former chairman Huang Guangyu and shareholders would be resolved, dealers said.

SHANGHAI RISES AS COAL MINERS GAIN

The Shanghai Composite Index was up 0.63 percent at 3,134.91 points, reversing a 0.6 percent decline on Thursday.

The index has recouped 18 percent in the past six weeks, partly boosted by quantitative easing measures in the United States.

Solid gains by coal miners offset a fall in banks such as heavyweight Industrial and Commercial Bank of China Ltd, one of the biggest drags on the index, after its rights issue was priced at a steep discount to the market price.

Analysts said the prospect of capital still flowing into the domestic market was offsetting the negative impact of tightening measures.

Despite China's tight control of capital flows, money disguised as trade and foreign investment, and funds eyeing capital market trading and property speculation via grey channels, are flooding Chinese markets, propelled by jumping asset prices and expectations of yuan appreciation.

"Yesterday's rise in reserve requirements and today's CPI 4.4 percent figure, suggests the measures addressing high inflation are reasonable. Capital flows entering the domestic market will offset some of the negative impact," said Guo Yanling, analyst at Shanghai Securities.

Miners soared with Anhui Hengyuan Coal Industry and Electricity Power Co Ltd jumped by its 10 percent limit, while Western Mining Co Ltd rose 7.9 percent.

Tightening would continue, economists warned.

"There will be structural movement going forward, with investors positioning their trades in inflation-related companies and moving out of banks, which will be the main sector hit," said Guo.

Sources told Reuters on Thursday that China raised reserve requirements twice, not once, for some banks.

But low valuations for bank would still be a redeeming factor, analysts said, suggesting the sector was still attractive.

Banks were mixed with ICBC down 1.7 percent, Agricultural Bank of China Ltd off 0.4 percent, and China Minsheng Banking Corp Ltd flat.

Volume remained active with turnover slipping only slightly to 141.1 billion yuan ($21.3 billion) from 143.1 billion yuan, sustaining a surge seen since the start of October. (Editing by Chris Lewis)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.