Hong Kong shares close morning higher; muted impact from MSCI changes

HONG KONG (AFX-ASIA) - Share prices closed the morning higher on a  technical rebound led by China Mobile, with investors largely ignoring the Morgan Stanley Capital International announcement reducing Hong Kong's weighting in its index based on the new free float calculations, dealers said. 

	    They said individual stocks which will either be included or removed from the MSCI indices performed accordingly, while Cheung Kong posted losses, with its inclusion having been widely expected, they said.

	    Amoy Properties, Hongkong Electric and China Aerospace gained on their  inclusion into the MSCI indices, while China Unicom fell as MSCI did not  include the stock in its indices, dealers said.  

	    They said the future movement of the local market would still depend on the performance of U.S. equities, with attention focusing on how the series of interest rate cuts there could prevent the U.S. economy from deteriorating.

	    The Hang Seng Index was up 215.27 points at 13,674.45, off a low of 13,465 .72 and a high of 13,711.17, on turnover of 4.50 bln hkd.

	    The Hang Seng May contract last traded at 13,710 points.    

	    The Hang Seng China Enterprises Index was up 3.00 points at 509.64,  while the CAC Index was up 13.55 points at 1,254.86.

	    The Tracker Fund was up 0.15 at 13.75 hkd and the GEM Index was down 0.25  points at 260.85 on turnover of 183.79 mln hkd.

	    The new free float adjustment brought down Hong Kong's weighting in the All Country World Index to 0.66 pct from 0.93 pct. Nonetheless the market opened higher and continued its momentum throughout morning trade, dealers said.

	    China Mobile led the gains, up 1.30 at 39.70 hkd on trade of 7.02 mln shares.  

	    Johnson Hui, vice president with Bank of China International Securities, said the muted reaction to the MSCI index changes was not a surprise.

	    "The MSCI changes have been widely expected. While fund managers will continue to adjust their portfolios based on the new indices, the impact will be limited. Many of them have done their adjustments," Hui said.

	    Cheung Kong, Cheung Kong Infrastructure, Hongkong Electric, Amoy  Properties, MTRC and Hong Kong Exchanges and Clearing will be included in the  indices, according to the MSCI.

	    Cheung Kong's inclusion had been expected, "while CKI's inclusion is a surprise to me," Lai said.

	    Cheung Kong fell 0.25 to 92.25, while CKI rose 0.10 to 13.05 and Hongkong Electric gained 0.40 to 28.25.

	    Amoy Properties rose 0.20 to 8.50, while MTRC was unchanged at 13.95.

	    Hong Kong Exchanges and Clearing was unchanged at 14.00.

	    Meanwhile, Hang Lung Development, Hongkong and Shanghai Hotels, Hopewell, Oriental Press, QPL International and Varitronix International will be removed from the indices.

	    Hang Lung rose 0.05 to 6.80, while Hongkong and Shanghai Hotels fell 0.075 to 4.20 and Hopewell lost 0.15 to 3.65.

	    QPL fell 0.20 to 3.35, Oriental Press shed 0.01 to 1.07 and Varitronix lost 0.25 to 5.90.

	    China Unicom fell 0.25 to 11.75 after the market learned that the stock will not be included in the MSCI index as expected.

	    Dealers said the stock is expected to face further selling pressure in the short term.

	    Hui said the performance of the Hang Seng Index will depend largely on how U.S. equities will also perform.

	    Dealers said the market has now begun to look at the bright side following the almost constant interest rate cuts in the U.S. in efforts to boost their economy.

	    Among interest rate sensitive stocks, HSBC rose 1.25 to 98.75 hkd and  Hang Seng Bank gained 0.75 to 89.25.

	    Sun Hung Kai Properties gained 1.75 to 77.75 and Henderson Land rose 0.50 to 37.10, while New World Development was unchanged at 10.10.

	    In the telecom sector, Hutchison Whampoa rose 0.75 to 86.00 and Pacific Century CyberWorks fell 0.05 to 2.70.

	    Legend rose 0.20 to 5.60 on a technical rebound.

	    Jusco rose 0.17 to 1.66 after announcing year to February results and a high dividend payout.

	    Sa Sa gained 0.08 to 0.88 on speculative buying.

	    Dealers said they expect China related stocks will continue to be attractive to investors on the back of China's fast growing economy.

	    China Aerospace rose 0.04 to 0.79, China Travel gained 0.03 to 1.68,  China Overseas added 0.02 to 1.22 and CNOOC rose 0.10 to 8.10 after MSCI said  they will be included in its China index.

	    China Eastern Airlines fell 0.01 to 1.29 and Sinopec shed 0.03 to 1.47.  MSCI announced both will be included in its China index.

	    On the GEM board, tom.com fell 0.075 to 2.10, while Sunevision rose 0.03 to 1.79.

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