January 18, 2017 / 5:31 AM / 2 years ago

China stocks rise despite weak small-caps; Hong Kong has solid gain

* SSEC +0.3 pct, CSI300 +0.5 pct, HSI +1.1 pct

* Small-caps in retreat again after advancing on Tuesday

* Baosteel 2016 profit signal helps main indexes

SHANGHAI, Jan 18 (Reuters) - China stocks rose on Wednesday morning despite renewed weakness in small-caps and worries about Donald Trump’s approach to Beijing, helped by a blue chip’s solid 2016 earnings projection.

Hong Kong stocks were bullish, rising above the psychologically key 23,000 level for the first time in a month and hitting a 2-1/2-month intraday high, as British Prime Minister Theresa May’s speech on Brexit brought a needed sense of certainty to global markets.

China’s blue-chip CSI300 index erased an initial loss and rose 0.5 percent, to 3,343.04 points at the end of the morning, while the Shanghai Composite Index gained 0.3 percent, to 3,117.71 points.

Heavyweight Baoshan Iron & Steel Co Ltd added more than 1.6 percent after the company on Tuesday said it expects net profit in 2016 to be nearly eight times the previous year’s level.

Underscoring a recent shift in investor preference, the start-up board ChiNext weakened again after the previous session’s rebound. It is down nearly 6 percent this year.

David Cui, BofA Merrill Lynch analyst, expects small-caps to keep facing pressure, as interest in “new economy” plays is cooling, while some investors opt to reduce holdings in a relatively expensive sector and send money offshore amid yuan depreciation fears.

Cui also said the market “hasn’t factored in any significant trade frictions between China and the U.S”.

“My sense is that if the tension starts to ratchet up, stocks will likely get sold off.”

But on Wednesday, sectors advanced across the board, with infrastructure stocks leading the gains, up more than 1.1 percent at the midday.

In Hong Kong, where stocks are more exposed to global markets, the Hang Seng index added 1.1 percent, to 23,101.40 points, while the Hong Kong China Enterprises Index gained 1.2 percent, to 9,814.81 points.

All sectors in the city advanced, led by industrial firms and energy majors, with indexes tracking the sectors both rose around 1.6 percent.

Reporting by Jackie Cai and John Ruwitch; Editing by Richard Borsuk

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