Oil prices moved sharply higher following the OPEC deal to cut oil production, which had an important impact in boosting the Hong Kong market.
The official mainland PMI index was stronger than expected with an increase to the highest level for over 2 years at 51.7 for November from 51.2 previously, which underpinned sentiment surrounding the near-term outlook, although there was a decline in the Caixin index for the month, which created a significant element of caution.
There were renewed dollar gains following the OPEC deal, which increased concerns surrounding competitiveness, although there was relief that the yuan was fixed stronger, which eased immediate concerns surrounding the mainland impact.
The People’s Bank of China (PBOC) circulated new rules for companies, which make yuan-denominated loans to overseas entities with the measures aimed at curbing capital outflows from China.
US yields were also an important focus with an increase in 10-year yields to fresh 18-month highs just above 2.40%, which increased concerns surrounding the threat of higher yields in Hong Kong, which would also pose important risks to the economy, especially in the property sector.
After opening slightly higher, the Hang Seng index advanced firmly during the morning session and peaked just below the 23,000 level before running into resistance. There was a more defensive tone during the afternoon session as fears over rising interest rates had a significant impact.
At the close, there was a gain of 88.46 points and 0.39% at 22,878.23, the highest close for three weeks. There was significant divergence in the market sectors with the Commerce sector rising 1.14% on the day and Finance also in positive territory, but there was a decline in Utilities and Property. The Hang Seng China Enterprises index rose 0.55% on the day.
Global trends in the dollar and energy prices will continue to have an important impact with developments surrounding bond yields also having a crucial influence with any further increase in yields undermining confidence.
Hang Seng 4H Chart