Alibaba leads Hong Kong stocks to best gain in a week as China data shows traction in recovery as markets brace for Fed rate hike

  • Reports on industrial production and retail sales exceeded market estimates, shoring up confidence in local stocks
  • The Fed is seen raising its target rate by 75 basis points later today, based on market pricing, in what would be the most aggressive tightening since 1994

Hong Kong stocks rose by the most in a week as government reports signalled China‘s economic recovery gained some traction last month, overcoming concerns about faster rate increases by the Federal Reserve in its policy lift-off.

The Hang Seng Index advanced 1.4 per cent to 21,367.11 at the local noon trading break. The Hang Seng Tech Index surged 2.6 per cent, while the Shanghai Composite Index added 1.4 per cent.

Alibaba Group Holding led gainers, rising by 4.6 per cent to HK$105.90. Ping An Insurance rallied 7.4 per cent to HK$50.25 while developer Country Garden climbed 5.5 per cent to HK$4.42.

Gains in local markets defied losses elsewhere in the Asia-Pacific region as traders bet China will ramp up policy stimulus to protect the economy ravaged by Covid-19 lockdowns. Banks including Goldman Sachs said the “policy put” has been activated, and the worst may be over since the market made a historic rebound from a mid-March sell-off.

Industrial production increased 0.7 per cent in May from a year earlier, the statistics bureau said on Wednesday, beating forecasts for a 0.9 per cent contraction among economists tracked by Bloomberg. Retail sales shrank 6.7 per cent, narrower than forecasts for a 7.1 per cent drop. Fixed-asset investment gained 6.2 per cent in the first five months, in line with expectations.

“The economic reports and other high-frequency data both point to stabilisation in growth and the effect of policy loosening,” said Cai Ruolin, a fund manager at HSBC Jintrust Fund Management in Shanghai. “We expect the market to trade on the recovery theme in the second half.”

Other notable winners on Wednesday included Meituan, which advanced 1.9 per cent to HK$198 and Hong Kong Exchanges and Clearing, whose share price climbed 3.2 per cent to HK$352.40.

Stocks swung this week as global equities slumped bear territory for the first time since the depth of Covid-19 pandemic in March 2020 on concerns about US rate increases and the spectre of more lockdowns in mainland China after a recent rebound in virus cases.

The Federal Reserve is expected to raise its target rate by 75 basis points as implied by fed fund futures, marking what would be the most aggressive tightening since 1994. Yields on the two-year Treasuries briefly surpassed those on the 10-year notes on Tuesday, an inversion that typically foreshadows a recession of the economy.

Global stocks, including US equities, entered a bear market on Monday, wiping at least US$18 trillion of market value from members of the MSCI All-Country World Index from its November peak. The gauge declined 0.7 per cent on Tuesday, extending the slide to 22 per cent from the top.

Author: Zhang Shidong, SCMP

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