Hong Kong Market gains 1% on trade, Fed optimism

Headline indices of the Hong Kong share market closed higher on Wednesday, 20 February 2019, as investors tracked gains from Wall Street overnight and amid the resumption of U.S.-China trade talks. At closing bell, the Hang Seng Index rose 285.92 points or 1.01% to 28,514.05. The Hang Seng China Enterprises Index added 112.51 points or 1.01% to 11,229.43. Turnover increased to HK$108.7 billion from HK$96.9 billion on Tuesday. The sub-index of the Hang Seng tracking energy shares ended up 0.7%, while the IT sector closed 1.3% higher, the financial sector ended 1% firmer and the property sector closed 1% higher.

The two countries (US-China) started a new round of talks to resolve their trade war on Tuesday, with sessions at a higher level are planned later this week. US President Donald Trump said on Tuesday that trade talks with China were going well and suggested he was open to pushing off the deadline to complete negotiations, saying March 1 was not a "magical" date. Tariffs on $US200 billion worth of Chinese imports are currently scheduled to rise to 25% from 10% if no trade deal is reached by March 1.

Investors will also look to the release on Wednesday of minutes from the Federal Reserve's January policy-setting meeting, where policymakers took a dovish turn, effectively signalling no further rate hikes. New York Fed President John Williams endorsed such an outlook, suggested he is comfortable with the US interest rate level and sees no need to raise them again unless economic growth or inflation shifts.

Shares of agriculture linked companies advanced after Chinese central authorities on Tuesday made public a raft of guidelines to prioritize the development of agriculture and rural areas, and seek progress in work relating to agriculture, rural areas and rural people. First Tractor (00038) jumped 3.9% to HK$2.11. China Agri-Products (00149) soared 5.6% to HK$0.038. China Mengniu Dairy (02319) climbed 3.4% to HK$26.05. China Modern Dairy (01117) surged 6.9% to HK$1.16. Ausnutria Dairy (01717) rose 0.9% to HK$9.85.

The interest rate-sensitive Hong Kong market enjoyed a further boost, after New York Fed President John Williams said on Tuesday he was comfortable with the current level U.S. interest rates, and that fresh hikes are not necessary unless economic growth or inflation shifts to an unexpectedly higher gear in the United States. HKEX (00388) gained 1% to HK$260.China Life (02628) surged 4.3% to HK$20.6 after Credit Suisse and DBS Research lifted their target prices for the insurer.

HSBC (00005) edged down 0.2% to HK$66.05 after it reported disappointing earnings, which triggered a slew of negative comments from research houses.

China's medical and health reforms bring headwinds to the pharmaceutical counters. Sino Biopharmaceutical (01177) dipped 2% to HK$6.41. Sinopharm Group (01099) shed 3.4% to HK$33.65.

Tencent (00700) climbed 1.2% to HK$341 after its President Lau Chi Ping confirmed investment scale will not reduce this year.

CICC (03908) shot up 5.8% to HK$17.9 as the stock exchange data show that Alibaba has added 117.1 million shares at an average price of HK$15.5.

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