Positive sentiment over trade, Fed optimism uplifts Hong Kong stocks

Hong Kong stocks ended higher on Wednesday on hopes that Beijing and Washington will broker a trade deal and de-escalate their year-long tariff war, while U.S. Federal Reserve official's comment on holding off further rate hikes lifted sentiment. At the close of trade, the Hang Seng index was up 1 per cent at 28,514.05 points, while the Hang Seng China Enterprises index also ended 1 per cent higher. Gains were seen across the board.

The sub-index of the Hang Seng tracking energy shares ended up 0.7 per cent, while the IT sector closed 1.3 per cent higher, the financial sector ended 1 per cent firmer and the property sector closed 1 per cent higher. Beijing and Washington started a new round of talks on Tuesday with sessions at a higher level to be held later in the week. U.S. tariffs on $200 billion in imports from China are set to rise to 25 per cent from 10 per cent if no deal is reached by March 1.

On Tuesday, U.S. President Donald Trump again suggested that he was open to pushing off the deadline to complete negotiations, saying March 1 was not a "magical" date. Investors expect a deal to be reached next month.

In Mainland China, the Shanghai Composite Index and the blue-chip CSI300 index both edged higher on trade talk optimism. 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.

Several Fed policymakers have said they expect one hike, or none at all, as the economic picture in the United States turns gloomy. The three largest H-share percentage gainers were China Gas Holdings, which closed up 10.4 per cent, China Life Insurance Co Ltd, which ended 4.3 per cent firmer, and China Cinda Asset Management Co Ltd, which closed 3.7 per cent higher. China Life was also the biggest percentage gainer on the main Hang Seng index.

Around the region, MSCI's Asia ex-Japan stock index rose more than 1 per cent, while Japan's Nikkei index closed up 0.6 per cent. At the close, China's A-shares were trading at a premium of 18.52 per cent over the Hong Kong-listed H-shares.