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Hong Kong Stocks: Resistance At 21,000 Points

4/19/2012 9:14 PM ET

The Hong Kong stock market has moved higher now in two straight sessions, jumping more than 430 points or 2 percent along the way. The Hang Seng Index finished just below the 21,000-point plateau, and now traders may be tempted to lock in gains when the market kicks off trade on Friday.

The global forecast for the Asian markets suggests consolidation following a disappointing batch of U.S. economic data. Adding to the cautious outlook, Spain saw strong demand for its debt during an auction on Thursday, but borrowing costs continued to rise amid increasing concerns that the country may be forced to seek a bailout. The downside may be limited by better than expected quarterly earnings - particularly among the financials. The European markets finished mixed and the U.S. bourses were down - and the Asian markets figure to split the difference.

The Hang Seng finished sharply higher on Thursday following gains from the financial shares and oil companies.

For the day, the index spiked 214.28 points or 1.03 percent to finish at 20,995.01 after trading between 20,767.46 and 20,995.01 on volume of 47.07 billion Hong Kong dollars.

Among the gainers, China Life jumped 3.9 percent, while Ping An climbed 3.0 percent, China Pacific Insurance surged 3.8 percent and CNOOC collected 1.6 percent.

The lead from Wall Street remains negative as stocks moved lower on Thursday after seeing considerable volatility in morning trade. Largely disappointing U.S. economic data weighed on the markets, offsetting positive sentiment from upbeat banking earnings.

Traders were disappointed by a slew of U.S. economic data, including a Labor Department report showing that jobless claims came in well above estimates in the week ended April 14. While jobless claims edged down to 386,000 from the previous week's revised figure of 388,000, analysts had expected 365,000.

Also, the National Association of Realtors reported an unexpected drop in existing home sales in March. Existing home sales fell 2.6 percent to an annual rate of 4.48 million in March from an upwardly revised 4.60 million in February. Economists had expected sales to edge up to 4.62 million.

The Philadelphia Federal Reserve also reported that its index of regional manufacturing activity fell to 8.5 in April from 12.5 in March, although a positive reading still indicates growth. Economists had expected the index to edge down to a reading of 12.0.

Meanwhile, traders largely shrugged off a separate report from the Conference Board showing that its leading economic index for the U.S. increased for the sixth consecutive month in March.

The disappointing economic data overshadowed better than expected first quarter earnings from financial giants Bank of America (BAC) and Morgan Stanley (MS).

The major averages climbed off their worst levels going into the close but remained firmly negative. The Dow dropped 68.65 points or 0.5 percent to finish at 12,964.10, while the NASDAQ fell 23.89 points or 0.8 percent to end at 3,007.56 and the S&P 500 slid 8.22 points or 0.6 percent to 1,376.92.

On the economic front, Hong Kong's seasonally adjusted jobless rate remained unchanged sequentially at 3.4 percent in the three months ended March, the Census and Statistics Department said on Thursday. Economists were looking for a jobless rate of 3.5 percent.

The underemployment rate increased to 1.6 percent during the period from 1.5 percent in the December-February period. At the same time, the number of employed persons in Hong Kong edged up by 1,000 to around 3.65 million in the quarter ended March.

Also, China's central bank has vowed to increase supply of liquidity to the financial system, through measures including reduction of banks' reserve requirement, according to reports. The People's Bank of China is considering options including reverse repurchase operations and reduction in the reserve requirement rate of commercial banks in order to release additional cash to the system, the report said.

The central bank will undertake "targeted liquidity management operations" while considering factors such as foreign capital inflows and loan demand. In February, the PBoC reduced the required-reserves ratio for the second time in three months to boost lending.

by RTT Staff Writer

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