Hong Kong shares jump on Spain bank aid; China edges higher

HONG KONG, June 11: Hong Kong shares rebounded on Monday amid a broad rally across Asia as a bailout for Spanish banks and China economic data that was not as bad as feared prompted offshore investors to cover short positions.
The Hang Seng index rose 2.1 percent to 18,883.4 points and was poised for its biggest one-day jump since Feb 15, while the China Enterprises index of top locally listed mainland firms rose 2.3 percent.
In China, the Shanghai Composite as well as the large-cap focused CSI 300 rose 0.3 percent by the midday trading break.
Data released over the weekend from China showed that while May exports and imports were much better than expected factory activity and retail sales remained sluggish.
An agreement between euro zone finance ministers on loans to help Spain’s battered banks at the weekend also underpinned the rally in risky assets, but trading activity remained light suggesting investors remained averse to making big bets ahead of Greek elections on June 17 which could determine the future of the euro zone currency bloc.
‘I’d say this is a brief respite,’ said Tom Kaan, a director at brokerage Louis Capital Markets in Hong Kong.
‘The news from Spain is clearly not the end of the euro zone story and concerns over China remain. In this sort of environment nobody wants to stay in a position for too long,’
said Kaan.
Bearish investors covered short positions in Hong Kong, boosting shares of cyclical sectors, such as materials, shipping and energy, which have borne the brunt of the selloff in recent weeks on the back of weakening global and domestic demand in China.
HSBC Holdings jumped 2.6 percent and was the biggest boost for the Hang Seng as the Spanish bank agreement
lifted European lenders. Standard Chartered shares rose 2.5 percent.
Among the top gainers, shipping firms China Cosco and China Shipping both gained 5.5 percent. China Shipping shares are recovering from an 8-year low hit last week.
Shares of China’s top insurer China Life rose 5.2 percent. Last week short-interest in its shares, expressed as a percentange of daily turnover, averaged 30 percent.
Brokers including Deutsche Bank and Citigroup maintained a cautious view on Chinese growth after the weekend’s data.
Calling the data a ‘mixed bag’, Jun Ma, economist at Deutsche Bank, said the outlook for June remained weak and the impact of policy easing would most likely be felt only by the third quarter.
China Shenhua fell 0.8 percent while premium liquor producer Kweichow Moutai fell 2.1 percent and was the biggest drag on the CSI300 index. Air China shares fell 2.4 percent.
A Hong Kong-based trader said China’s domestic markets were also being weighed down by potential fund-raising after autho+rities had approved a large amount of initial public offerings, secondary offerings and bond issuances as well as new investment projects.
The property sector continued to outperform in Shanghai, however, with the sector sub-index up 0.7 percent. Poly Real Estate was up 1.6 percent while Vanke
Rose 0.9 percent.
Developers in Hong Kong also broadly tracked the market’s
gains with the exception of Wharf Holdings, which gave some of last week’s gains and was down 2.4 percent and was among a handful of Hang Seng constituents lower on the day.
Wharf, which was downgraded by broker CLSA following a deal to take a 20 percent stake in debt-laden Greentown Holdings , had risen nearly 6 percent last week.
Greentown surged more than 36 percent on Monday.