Hong Kong Stocks Rally as Focus Shifts to Trump’s Stimulus Plans

(Bloomberg) -- Hong Kong stocks tracked an about-turn in global markets as investors looked beyond the shock of Donald Trump’s surprise victory to focus more on his plans to cut taxes and stimulate the economy.

The Hang Seng Index jumped 1.9 percent, the most since May, after tumbling more than 2 percent in the previous session. China Shenhua Energy Co. and Cnooc Ltd. surged as the price of oil climbed back above $45 a barrel. The Shanghai Composite Index rose to a 10-month high, helped by Jiangxi Copper Co., amid a rally in metal prices.

Hong Kong shares joined their regional peers in all but erasing Wednesday’s losses as traders reassessed the implications of Trump’s win in the U.S. presidential election. The development has clouded the outlook for a Federal Reserve interest-rate increase amid speculation the Republican could ramp up fiscal stimulus, while also potentially pursuing a more pro-business agenda. Trump has signaled spending of more than $500 billion to rebuild U.S. infrastructure and also pledged to lower taxes.

“It’s hard to make a directional bet as no one knows for sure what Trump will do,” said Hao Hong, chief strategist at Bocom International Holdings Co. in Hong Kong. “Bets that are relatively certain include infrastructure projects, defense spending and unfriendly trade policy. Commodity stocks are jumping on such expectations."

The Hang Seng Index rose to 22,839.11 in Hong Kong. The Hang Seng China Enterprises Index of mainland equities traded in the city jumped 1.8 percent, the most in more than five months. The Shanghai Composite climbed 1.4 percent to extend its gains from a January low to more than 19 percent, setting it on course for a technical bull market.

The Hang Seng Index oscillated more than 1,000 points on Wednesday, the most since Britain’s vote to leave the European Union triggered global market chaos in June. The Hong Kong gauge fell as much as 4.2 percent yesterday before paring some of the losses as Trump struck a conciliatory tone in his victory speech.

Thursday’s stock gains aside, Trump’s victory raises pressure on Chinese assets. The billionaire has branded the Asian nation a “grand master” at currency manipulation and said that it was stealing American jobs. He has threatened punitive tariffs of up to 45 percent on the country’s imports, a step that Commonwealth Bank of Australia estimated would cut China’s shipments to the U.S. by 25 percent in the first year.

China Vanke Co. rose 1 percent in Shenzhen after Wednesday’s 8.6 percent advance. China Evergrande Group bought 161.9 million Shenzhen-listed Vanke shares between Aug. 16 and Nov. 9, boosting its stake to 8.3 percent, Evergrande said in a filing to Hong Kong’s stock exchange after the close of trading on Wednesday.

China Shenhua Energy climbed 1.9 percent in Hong Kong, while Cnooc added 2.7 percent. All but three of the Hang Seng Index’s 50 members rose for the day, almost a mirror image of Wednesday’s moves. HSBC Holdings Plc added 3.5 percent. United Co. Rusal shares jumped as much as 25 percent, the biggest intraday gain since its 2010 listing, before a board meeting to approve its third-quarter earnings. AviChina Industry & Technology Co., which manufactures and sells aviation tools and aero-parts, added 2.7 percent, the most in two months. BOC Hong Kong Holdings Ltd. rose 4.2 percent.

Metals Rise

Copper led industrial metals higher on the London Metals Exchange on expectations Trump will boost infrastructure spending. All other metals advanced, with the LME’s index rising 2.1 percent to its highest since June last year. Baoshan Iron & Steel Co. advanced 1.6 percent and Angang Steel Co. rose 2.9 percent on the mainland, while Jiangxi Copper added 10 percent.

Separately, Hong Kong is planning to step up its efforts to police misconduct by sponsors of initial public offerings. The Securities and Futures Commission will bring more cases against IPO sponsors, or financial institutions that sign off on listings, Thomas Atkinson, the regulator’s executive director of enforcement, said Wednesday.

Shenzhen Link

Hong Kong’s stock market operator said on Thursday that preparations for a share-trading link between the city and Shenzhen have been completed, but no official launch date has been set for now. Everything is place for the connect and authorities will make an announcement on a start date when "the time is right," Hong Kong Exchanges and Clearing Ltd. Chief Executive Charles Li was cited as saying by Radio Television Hong Kong.

The Shenzhen Stock Exchange has allowed seven fund companies -- including Bosera Funds, China Merchants Fund and China Southern Asset Management -- to participate in the upcoming Shenzhen-Hong Kong equity link, 21st Century Business Herald reported, citing people it didn’t identify.

On the mainland, the China Securities Regulatory Commission said unqualified individuals and institutions are illegally selling investment advice and touting stocks via social media tools, according to a statement. The CSRC has also ordered all futures brokers not to provide any form of margin funding, Shanghai Securities News reported.

--With assistance from Kana Nishizawa and Zhang Shidong To contact the reporter on this story: Fox Hu in Hong Kong at fhu7@bloomberg.net. To contact the editors responsible for this story: Richard Frost at rfrost4@bloomberg.net, Robin Ganguly

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