Hong Kong, Shanghai stocks jump
Tuesday, 22 June 2010
HONG KONG/SHANGHAI, June 21 (Reuters): Hong Kong and Shanghai shares jumped around three per cent Monday as China scrapped its currency peg and allowed the yuan to rise, boosting confidence in the global economic recovery.
Many analysts see the yuan appreciating further in coming days, with stronger purchasing power in the world's third-largest economy making China an even more compelling international investment theme.
Global stocks also rose as the currency move boosted shares of companies exporting goods and raw materials to China.
"China is joining the rest of the world in supporting global demand," said Todd Martin, Asia equity strategist at Societe Generale. Hong Kong's Hang Seng index rose 3.1 per cent to 20,912.18 points, with the China Enterprises Index of mainland Chinese firms ending 4.4 per cent higher, its sharpest gain in over a year.
Hong Kong's equity market represents the largest pool of offshore yuan-based assets available to global investors, and will continue to benefit if Beijing allows further yuan gains, analysts at Morgan Stanley said in a note.
China's key stock index, the Shanghai Composite, closed 2.9 per cent, shrugging off a timid open as the yuan firmed.
The yuan rose as much as 0.43 per cent in the spot market at one point, its biggest one-day gain since its revaluation in 2005. Beijing had kept the currency pegged to the US dollar for nearly two years to help its exporters weather the global downturn.
Its announcement at the weekend that it would unshackle the currency was seen as a sign that Chinese leaders believe China's economic recovery, and the global rebound, are now on more solid footing despite worries about Europe's sovereign debt crisis.
Gains in Hong Kong and Shanghai markets were broad based, with jumps in shares of Chinese airlines, automakers and other sectors seen as immediate winners from yuan appreciation, which will make purchases of fuel or parts from overseas more affordable. Financial stocks in Hong Kong rose three per cent, with insurance companies and banks leading gains as their substantial yuan-denominated assets were seen becoming more valuable.
Ping An Insurance rose 6.5 per cent, while Bank of Communications was up 6.3 per cent. Property stocks also moved higher on hopes that Beijing's decision to allow greater currency flexibility now will delay any interest rate hikes or more aggressive policy action by the central bank to keep the economy from overheating.
Sun Hung Kai Properties climbed 4.3 per cent. Even shares of firms seen as vulnerable to a stronger yuan were caught in the updraft, with commodity producers such as Aluminum Corp of China (Chalco) rising five per cent.
Chalco and its peers could be hardest hit over the long term as they face dollar-denominated prices for their output, while their costs are in yuan.
Many analysts see the yuan appreciating further in coming days, with stronger purchasing power in the world's third-largest economy making China an even more compelling international investment theme.
Global stocks also rose as the currency move boosted shares of companies exporting goods and raw materials to China.
"China is joining the rest of the world in supporting global demand," said Todd Martin, Asia equity strategist at Societe Generale. Hong Kong's Hang Seng index rose 3.1 per cent to 20,912.18 points, with the China Enterprises Index of mainland Chinese firms ending 4.4 per cent higher, its sharpest gain in over a year.
Hong Kong's equity market represents the largest pool of offshore yuan-based assets available to global investors, and will continue to benefit if Beijing allows further yuan gains, analysts at Morgan Stanley said in a note.
China's key stock index, the Shanghai Composite, closed 2.9 per cent, shrugging off a timid open as the yuan firmed.
The yuan rose as much as 0.43 per cent in the spot market at one point, its biggest one-day gain since its revaluation in 2005. Beijing had kept the currency pegged to the US dollar for nearly two years to help its exporters weather the global downturn.
Its announcement at the weekend that it would unshackle the currency was seen as a sign that Chinese leaders believe China's economic recovery, and the global rebound, are now on more solid footing despite worries about Europe's sovereign debt crisis.
Gains in Hong Kong and Shanghai markets were broad based, with jumps in shares of Chinese airlines, automakers and other sectors seen as immediate winners from yuan appreciation, which will make purchases of fuel or parts from overseas more affordable. Financial stocks in Hong Kong rose three per cent, with insurance companies and banks leading gains as their substantial yuan-denominated assets were seen becoming more valuable.
Ping An Insurance rose 6.5 per cent, while Bank of Communications was up 6.3 per cent. Property stocks also moved higher on hopes that Beijing's decision to allow greater currency flexibility now will delay any interest rate hikes or more aggressive policy action by the central bank to keep the economy from overheating.
Sun Hung Kai Properties climbed 4.3 per cent. Even shares of firms seen as vulnerable to a stronger yuan were caught in the updraft, with commodity producers such as Aluminum Corp of China (Chalco) rising five per cent.
Chalco and its peers could be hardest hit over the long term as they face dollar-denominated prices for their output, while their costs are in yuan.