Hong Kong stocks up driven by upbeat earnings, China policy support hopes

Posted by Admin May 17, 2024 Bussiness

Hong Kong stocks rose on Friday, keeping the benchmark index on track for its fourth straight week of gains, as results from Baidu and JD.com suggested corporate earnings may have bottomed out and patchy economic data raised hopes that Beijing will deliver more policy support.

The Hang Seng Index climbed 0.3 per cent to 19,433.14 at the noon break, taking the week’s gain to 2.4 per cent. A fourth weekly gain could mean the longest stretch of advances registered since January 2023. The Hang Seng Tech Index added 0.7 per cent and the Shanghai Composite Index slipped 0.1 per cent.

Baidu rallied 3 per cent to HK$111.60 and e-commerce giant JD.com gained 0.4 per cent to HK$132.90 after both companies reported first-quarter results that exceeded the consensus estimates. Alibaba Group Holding surged 6.8 per cent to HK$85.15, rebounding from a slump spurred by weak earnings.

Property stocks were in focus as authorities including China’s central bank and the housing ministry are due to hold a joint press conference titled “Supporting policies on ensuring housing delivery” on Friday afternoon. Longfor Group Holdings surged 5.2 per cent to HK$14.52, extending the 11 per cent surge posted the previous day.

“The government does not need to purchase all unsold homes to bring the market closer into balance,” said Julian Evans-Pritchard, head of China Economics at Capital Economics. “It simply needs to bring the inventory to sales ratio, which is at its highest level since at least 2016, back down to normal levels.” He estimated this would require the government to purchase a third of all unsold homes, which would need 3 trillion yuan in funding.

A residential building under construction at the China Vanke Co. Elegant Lifestyle project in Shenzhen, China, on Wednesday, April 17, 2024. Photo: Bloomberg

In sign of weakening consumer spending, retail sales grew by 2.3 per cent last month, the statistics bureau said on Friday, falling short of the consensus estimate for a 3.7 per cent increase. Fixed-asset investment expanded at slower-than-expected 4.2 per cent in the January-to-April period, with declines in property investment deepening. Industrial output remained as a bright spot, rising at faster-than-estimated 6.7 per cent in April.

“This set of macro data, combined with the weak credit data in April, may push the policymakers to take stronger actions to boost domestic demand,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management. “The likelihood of rate cut in the second quarter is rising.”

Home prices dropped at a faster pace in 70 major cities in April, with prices of new homes sliding 0.6 per cent month-on-month and those of second-hand ones falling 0.9 per cent, the statistics bureau said less than hour before the release of April economic data on Friday.

The set of data may take some heat out of strong sentiment on Hong Kong stocks, which have been on a roll over the past month after China removed purchase restrictions in most of the cities in the nation and speculations were growing that Beijing would scrap a tax dividend on mainland investors that trade the city’s stocks. Expectations for an early rate cut by the Federal Reserve have also brought back foreign inflows.

HSBC Holdings sank 3 per cent to HK$68 on speculation Ping An Insurance Group is considering selling a stake in the UK bank. The Chinese insurer rose 1.4 per cent to HK$43.60.

Hollwi Urban Operation Service Group, a Chinese state-owned property-management company, traded unchanged from its IPO price of HK$3.20 on its trading debut in Hong Kong.

Other major Asian markets fell across the board on US interest rate cut uncertainties. Japan’s Nikkei 225 slipped 0.2 per cent, while South Korea’s Kospi retreated 1 per cent and Australia’s S&P/ASX 200 lost 0.8 per cent.