Hong Kong stocks inch up on earnings optimism and policy support hopes

Posted by Admin May 13, 2024 Bussiness

Hong Kong stocks posted cautious gains on optimism that corporate earnings will improve and policy support will emerge after the weekend data release that showed weak credit expansion in the world’s second largest economy

The Hang Seng Index rose 0.4 per cent to 19,036.13 at 11:45am and is now on track to close at its highest since August 11. The Hang Seng Tech Index added 0.9 per cent but the Shanghai Composite Index retreated 0.1 per cent.

Alibaba Group Holding rallied 3.6 per cent to HK$80.80 and Tencent Holdings added 1.7 per cent to HK$377.20, ahead of their quarterly earnings announcements, due on Tuesday. Biopharmaceutical firm Wuxi AppTec advanced 3.7 per cent to HK$39.50, after the US introduced a revised bill that will offer more grace period before a possible ban on Chinese drug makers from doing businesses with the Federal government.

“There is more upside for Hong Kong stocks as China keeps loosening the restrictions on the property market and corporate earnings outlook has improved,” said Fang Yi, an analyst at Guotai Junan Securities in Shanghai.

The Hang Seng Index has extended its world-beating rally from April, rising more than 7 per cent this month, after key cities like Hangzhou and Xian scrapped all the curbs on home purchases in a move of stepped-up support for the property market. Exports and imports both exceeded the consensus estimates last month.

First-quarter profit for Tencent probably rose 34 per cent from a year ago, while that for Alibaba may have fallen 39 per cent, narrowing from a 69 per cent slump for the previous three-month period, according to the estimates of the analysts tracked by Bloomberg.

Bronze sculptures of bulls, the symbol of the Hong Kong stock exchange, at the Exchange Square in Central. Photo: Warton Li

China’s aggregate financing, the broadest measure of credit supply, fell by almost 200 billion yuan (US$28 billion) from the preceding month in April, according to the data release by the central bank on Sunday. That marked the first such decline since at least 2017.

“This very weak credit growth may indicate that real interest rates remain too high for the current strength of the economy,” said Lynn Song, ING’s chief economist, Greater China. “The market’s baseline case for this Wednesday’s medium-term lending facility rate remains no rate cut, as previous hints pointed to RRR cuts prior to a rate cut, but the weekend’s data add to the probability of a surprise rate cut.”

In another sign of weak demand, producer prices fell by 2.5 per cent year-on-year last month for a 19th straight month of declines, according to the data released by the statistics bureau a day earlier. Consumer inflation accelerated to 0.3 per cent, compared with 0.1 per cent in March.

China to nurture stock rally by masking live foreign flows data

The rally in Hong Kong stocks will be put to test this week as more key China economic data for April, such as home prices and industrial production, is due on Friday to offer investors more clues on the strength of the recovery in the world’s second-largest economy.

ESR Group, a logistics property platform, was suspended from trading on Monday pending an announcement on takeovers and mergers. The stock jumped 12 per cent to HK$10 on Friday.

Elsewhere, Reach Machinery, which makes transmission parts and brakes for robots and automated production lines surged 190 per cent to 75.10 yuan on the first day of trading in Shenzhen.

Other major Asian markets were mostly down. Japan’s Nikkei 225 rose less than 0.1 per cent, while South Korea’s Kospi eased 0.3 per cent and Australia’s S&P/ASX 200 dipped 0.2 per cent.