Hong Kong stocks flat, investor sentiment supported by policy expectations

Hong Kong stocks were flat in early trade on Thursday as China kept its lending rate unchanged, with investors awaiting more policy support from Beijing ahead of the city’s handover anniversary next month.

The Hang Seng Index was virtually flat at 18,434.25 as of 10:30am local time, after it reported its biggest daily gain in three months on Wednesday when it rose 2.9 per cent. The Tech Index dropped 0.7 per cent while the Shanghai Composite Index was steady.

On Thursday, China left the benchmark lending rates unchanged as the market expected after the country’s central bank held its one-year medium-term lending facility earlier in the week. The one-year loan prime rate (LPR), which most new and outstanding loans in China use, was kept at 3.45 per cent, while the five-year LPR for mortgages stayed at 3.95 per cent.

“The renminbi has been under considerable pressure recently and rate cuts would drag on the currency further,” said Leah Fahy, assistant economist of Capital Economics. “Policymakers will be keen to avoid this, given the importance the government places on currency strength.”

Chip maker Semiconductor Manufacturing advanced 3.4 per cent to HK$19.48 amid speculation about its ability to create 5nm chips using older deep ultraviolet lithography machines.

Retail stocks eased with Chinese hotpot restaurant operator Haidilao down 4.3 per cent to HK$15.62 and Budweiser Brewing declining 2.9 per cent to HK$8.86.

“Today may be a bit boring after seeing the stock market’s advancement yesterday, but overall I am not too pessimistic mainly because of the policy expectations,” said Kenny Wen, head of investment strategy at KGI Asia. He added that investors are awaiting policy support for Hong Kong’s economy and stock market around July 1 – on the city’s China handover anniversary on July 1 – and ahead of next month’s third plenum of the Central Committee of China’s Communist Party.

SOE stocks traded higher. CNOOC gained 2.6 per cent to HK$23.3, PetroChina advanced 2.5 per cent to HK$7.81, China Petroleum and Chemical surged 2.5 per cent to HK$4.97 after Wednesday’s inflows from state-run funds, including China Reform Holding.

Other key Asian markets were broadly lower. Japan’s Nikkei 225 declined 0.7 per cent and Australia’s S&P/ASX 200 dropped 0.1 per cent. South Korea’s Kospi rose 0.1 per cent.

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