STRONG SHOWINGS by H-shares on the Hang Seng powered the benchmark index to a 1.6% gain for the week, closing Friday trade at 22,208.50, the strongest performance by the Hong Kong bourse in six weeks.
Robust 2009 earnings by Chinese firms like Tsingtao Brewery and telecom infrastructure player ZTE buoyed the bourse, and encouraging economic signs out of the US also helped the cause.
Meanwhile, a 0.9 % Friday rise in Chinese A-shares failed to prevent the benchmark Shanghai Composite Index from losing 0.4% on the week to finish at 3,145.35.
Surprisingly upbeat retail sales figures from the US gave a boost to Chinese firms, still heavily reliant on exports, and a continuous stream of healthy earnings for last year helped both Hong Kong and mainland stock markets end the week higher.
Stronger Yuan?
Although China is the world’s biggest exporting nation, recently overtaking Germany for the honor, not all domestic firms would be punished by a stronger yuan, which makes their products more expensive in overseas markets.
One direct beneficiary of an appreciating local currency is the commercial aviation sector.
A stronger yuan means less expensive fuel prices – one of the biggest costs burdening carriers, and foreign liabilities become easier to settle when the US dollar suddenly loses value against the yuan.
Dual-listed flagship carrier Air China was rose 3% Friday to 13.54 yuan, logging a five-day increase of 11.2%. Meanwhile, China Eastern Airlines Corp added 2.2% to close Friday at 8.99 yuan.
Other Chinese firms saw their shares rise Friday following stronger-than-expected results.
China’s No.2 beermaker by volume, Tsingtao Brewery, rose 2.5% to 41.20 hkd after its 6-month profit leapt 92% on frothy sales and lower costs.
IT firms, including handset makers, social media portals and telecom equipment players were lifted by positive news on the policy front.
News that Beijing intends to boost investment in 3G mobile technology through in injection of 400 bln yuan in subsidies by 2011 gave peers in the industry cause for cheer.
Several state agencies announced China planned to have over 400,000 3G base stations serving 150 mln users by 2011.
Telecom equipment giant ZTE Corp (HK: 763; SZA: 000063 jumped 3.7% Friday to 48.65 hkd both on the government support news and after reporting a 48.1% jump in 2009 net profit to 2.5 bln yuan.
Social networking portal Tencent (HK: 700) rose 2.28%.
H-share financials also ended the week higher in Hong Kong.
China Merchants Bank (HK: 3968; SHA: 600036) rose 3.6%, Industrial and Commercial Bank of China (ICBC) Asia (HK: 349.HK) added 3.5% and HSBC (HK: 5) gained 2.9%.
Analysts say one of the main things to watch for this coming week is possible action on the yuan-US dollar exchange rate.
High-level officials from both countries are reportedly in back and forth discussions which might possibly end in a one-off appreciation spike for the yuan vis-à-vis the greenback.
However, China’s announcement yesterday that it recorded the first monthly trade deficit (7.24 bln usd) in March for some six years surely comes at a good time for Chinese negotiators arguing that its currency is not intentionally undervalued.
Analysts are expressing skepticism about the timing of the surprising monthly deficit, and say that progress on the exchange rate one way or another will help determine where Chinese shares are headed over the short term.
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