Alibaba leads Hong Kong stock gains on bets China to boost support as economic toll mounts while HSBC, lenders rise on rate outlook

  • Alibaba leads turnaround in Thursday trading as more reports show China’s economy is hurting from Covid-19 lockdowns
  • JD.com rallies after proposing a US$2 billion special dividend to holders of ordinary shares and American depositary units

Hong Kong and mainland Chinese stocks jumped on speculation Beijing will step up policy stimulus measures to support businesses as more reports showed the fallout from Covid-19 lockdowns. Banks surged on prospects of wider lending margins.

The Hang Seng Index rose 0.7 per cent to 21,006.67 at the local noon trading break, the highest level since April 19. The Tech Index advanced 1.7 per cent while the Shanghai Composite Index added 1.1 per cent as the mainland financial markets reopened after a three-day holiday.

Alibaba Group climbed 1.9 per cent to HK$98.35 while Tencent gained 0.2 per cent to HK$369.20. Bilibili and Baidu surged by 5.5 per cent and 4.3 per cent, respectively, while Xiaomi jumped 3.5 per cent to recoup Wednesday’s slide.

China has pledged to support the economy amid mounting economic toll from partial and citywide lockdowns in areas that generate up to a fifth of annual national output. China’s services industry fell more than expected in April to the lowest level since March 2020, the Caixin/Markit PMI Services Index showed today.

“Given the Covid-related downward pressure on the economy, we expect more policy easing to support growth,” UBS Securities said in a report. Even so, China is not likely to do “whatever it takes” to achieve its ambitious growth target this year, it added.

The slide added to government reports this week showing Chinese manufacturing contracted in April to the lowest level since February 2020, while Hong Kong’s economy shrank more than expected by 4 per cent in the first quarter amid curbs to contained the fifth wave of pandemic.

Elsewhere, JD.com rallied 2.5 per cent to HK$245.60 after the e-commerce and logistics group proposed a US$2 billion special dividend payout to its shareholders. That translates into 63 US cents for each ordinary share and US$1.26 for each of its depositary shares.

HSBC, the biggest lender in Hong Kong, gained 0.9 per cent to HK$51.20 while its subsidiary Hang Seng Bank climbed 1.3 per cent to HK$144.60 on optimism higher interest rates in the city will expand lending margins on consumer and corporate loans.

The Hong Kong Monetary Authority on Thursday raised its base rate to 1.25 per cent in the biggest hike since 2000, in lockstep with a half-point increase in federal funds rate by the Federal Reserve as the US tightened its policy to overcome the fastest inflation in four decades.

“The interest rate rise by the US Fed will have a positive impact on the [net interest margin] of Hong Kong banks, which is a bright spot in the current environment,” said Paul McSheaffrey, head of banking and capital markets in Hong Kong at KPMG. Loan growth, however, may be more challenging, he added.

Major Asian markets were mixed. South Korean and Japanese stocks fell 0.1 per cent, while Australian equities rose 0.9 per cent.

Author: Ann Cao, SCMP

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