Alibaba, Chinese developers lift Hong Kong stocks to two-month high as China cuts interest rates, unveils spending stimulus

  • China trimmed one-year loan prime rate for a second time in a month, while the five-year rate fell for the first time since April 2020 as policy easing gathers momentum
  • Stocks are headed for the highest level since November 25 as Alibaba leads tech peers and property developers rally

Hong Kong stocks rose to the highest level in about two months after China cut a key lending rate for a second time in a month and stepped up infrastructure spending to prop up growth. Alibaba Group Holding led gains among tech peers.

The Hang Seng Index advanced 2.3 per cent to 24,689.32 at the local midday trading break, approaching a level last seen on November 25. The Tech Index jumped 3.3 per cent, the most in a week, while the Shanghai Composite Index added 0.3 per cent.

Property developers led Thursday’s rally on optimism cheaper and freer flow of credit will alleviate an industry-wide liquidity crunch and revive home sales. China is drafting rules that will make it easier for developer to access proceeds from presale of homes, according to media reports.

“The new cycle of easing has come as expected,” said Xu Chi, an analyst based in Shanghai at Zhongtai Securities. “We should remain positive on the stock market” as risk appetite is set to improve, he added.

China’s one-year loan prime rate, set on the 20th every month, fell by 10 basis points to 3.7 per cent, according to central bank data. The rate was trimmed by five basis points on December 20, the first decline since April 2020. The five-year rate fell five basis points to 4.6 per cent on Thursday, the first since April 2020.

Country Garden Services surged 13 per cent, while its former parent Country Garden rallied 6.3 per cent and Longfor gained 4 per cent. Alibaba, the owner of this newspaper, jumped 4.4 per cent and Tencent Holdings added 4.7 per cent.

The Hang Seng Mainland Properties Index, which tracks the performance of Chinese developers traded on the Hong Kong stock exchange, rose by as much as 5.2 per cent.

“Monetary loosening is necessary, considering that real estate is a slow variable and it may take time for fiscal expansion to become effective,” analysts led by Huang Wenjing at China International Capital Corp wrote in a report.

Separately, China will extend its high-speed rail line nearly 32 per cent by 2025, roughly equal to the combined length of the next five largest countries by network size, turning to infrastructure spending to stabilise growth.

Elsewhere, PetroChina slid 2 per cent after the oil producer said that a unit was found to have violated rules in oil trading by China’s auditing administration.

AAC Technologies tumbled 9.8 per cent, on track for a one-year low, after the marker of acoustic components forecast a decline of as much as 16 per cent in 2021 profit due to a higher year-earlier base fuelled by special exchange gains and a decrease in government subsidies. The stock was the worst performer on the Hang Seng Index.

Chengda Pharmaceuticals, a Zhejiang province-based drug maker, jumped 58 per cent from its initial public offering price on the first day of trading in Shenzhen.

Author: Zhang Shidong, SCMP

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