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=ASIA MARKETS: Chinese Companies Lead Hong Kong Market Up Amid MSCI Hopes

HONG KONG (Sep 26) -- Hong Kong shares headed higher on Wednesday, led by gains for Chinese stocks listed in the city, amid hopes that index compiler MSCI could increase the weighting of mainland companies in its global equity benchmarks.

The Hang Seng Index added 1.6% to 27,950.71 by noon after sliding 1.6% on Monday. Local markets were closed on Tuesday for a holiday. Energy producers CNOOC and PetroChina rose 5% and 4.1%, respectively, as the Brent crude oil contract climbed 3.8% on Monday and Tuesday. Forty-four of the index’s 50 constituents traded higher by noon.

The Hang Seng China Enterprises Index of large mainland companies listed in Hong Kong rose 2.3% after MSCI said on Tuesday that it is starting a consultation to consider giving large mainland stocks a 20% inclusion factor in its indexes - four times their current weighting. MSCI, whose indexes are tracked by money managers with hundreds of billions of dollars in assets, also proposed adding mid- and small-cap Chinese shares to its indexes. The statement came within months of Chinese shares being included in the MSCI Emerging Markets Index for the first time.

Markets also await the outcome of the U.S. Federal Reserve’s two-day policy review that concludes later Wednesday. The central bank is widely expected to raise rates at the meeting, with investors awaiting its outlook for future tightening amid a trade war between the U.S. and China. The two nations this week imposed a third round of tariffs on goods they import from each other.

The possible increase in the MSCI weighting “is good news for A-shares” and could also drive up equities in Hong Kong, said Linus Yip, chief strategist at First Shanghai Securities. “On the Sino-American trade war, it seems the chances for negotiation are getting slimmer. People think it will be a protracted trade war and will not get resolved that quickly.”

In the mainland, the Shanghai Composite added 1.3%.

Shares of Haidilao International Holding, which operates a chain of hotpot restaurants, advanced 2.8% in Hong Kong after raising HK$7.56 billion ($968 million) in gross proceeds from an initial public offering.

Asphalt tanker chartering services company Xin Yuan Enterprises Group, also making a debut in Hong Kong on Wednesday, fell 10.7% from its IPO price.

CSPC Pharmaceutical Group climbed 4.2% after saying it entered an exclusive produce license and collaboration agreement with Verastem for the development and commercialization of cancer drug COPIKTRA. The company said will make an upfront payment of $15 million to Verastem, and further development milestone payments of up to $30 million, in addition to sales milestone and royalty payments on future net sales in China, Hong Kong, Macau and Taiwan.

Oil and gas explorer MIE Holdings soared 68.5% after saying it will sell its unit Maple Marathon for $250 million amid efforts to refinance debt and improve cash flow and liquidity. The company also intends to dispose of all non-core assets, including its 40% stake in its Kazakhstan business and 34% stake in the South China Sea business, to reduce debt.

Central China Real Estate added 3% after saying its unit agreed to buy 100% of Jujia Investment, which owns property in China, for 290 million yuan ($42.3 million) from a company owned by Chairman and controlling shareholder Wu Po Sum.

Ascletis Pharma advanced 4.1% after saying its hepatitis C drug Ganovo (danoprevir) has been enrolled in the basic medical insurance in a pilot program for outpatients in China’s Tianjin city.

Solartech International Holdings declined 4.2% after saying it expects its loss for the full year ended June 30 to widen on-year.

- By Benny Kung; benny.kung@nikkeinewsrise.com; +85239605150
- Edited By Suzannah Benjamin
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