Alibaba, WH Group spur Hong Kong stocks as Covid cases in mainland subside, China ramps up efforts for economy

  • Stocks are headed for the best gain in three weeks on signs Covid-19 outbreaks in mainland China are under control
  • Alibaba, WH Group and China Merchants Bank lead early winners, each gaining by at least 4 per cent

Hong Kong stocks jumped on signs Covid-19 outbreaks in China are easing, fuelling hopes for a wider reopening of the Shanghai economy while policymakers ramped up efforts to shore up growth.

The Hang Seng Index advanced 1.2 per cent to 20,190.06 at the local noon trading break, heading for the biggest gain in three weeks. The Tech Index added 0.7 per cent while the Shanghai Composite Index gained 0.3 per cent, extending a rebound from a two-year low.

China Merchants Bank rallied more than 5 per cent, the most in two months. Pork processor WH Group jumped 4.8 per cent to HK$5.64 and Alibaba, the owner of this newspaper, advanced 3.7 per cent to HK$87.65.

Sentiment improved as Omicron cases dropped in mainland’s biggest cities, with new infections in Shanghai falling to a three-week low on Wednesday. Infections in Beijing were brought under control after mass testing covering most areas in the capital. Authorities lifted a two-month lockdown in the northeastern city of Changchun from Thursday.

New Covid-19 cases in Shanghai fell for the fifth straight day, plunging to a 24-day low, according to city officials, and prompting authorities to work on plans for restarting manufacturing, public transport, and retail in the mainland’s financial capital.

While the People’s Bank of China last week offered a 23-point guidance on shoring up funding and support for businesses battered by the pandemic, it remains cautious about unleashing its full firepower, refraining from lowering borrowing costs and cutting the reserve requirement ratio by less-than-estimated 25 basis points.

“We believe China is ready to act and likely to step up policy easing should a sharper economic slowdown occur,” Kai Kong Chay, senior portfolio manager for Greater China equities at Manulife Investment Management, said in a report. “While near-term market sentiment has been mixed, we view the latest measures as signs that China is on track to maintain its economic course.”

Calls for more aggressive policy loosening have been mounting among investors, as the lockdown in Shanghai and other cities undermined the official growth target of 5.5 per cent for this year.

Traders will turn to a Politburo meeting later this week for more insight into how top leaders will calibrate policies to navigate the world’s second-largest economy through the macro headwinds.

Premier Li Keqiang urged coordination among different state departments to ensure smooth logistics to reduce supply-chain disruption, according to a statement after a weekly State Council meeting on Wednesday. The government will also increase support of smaller enterprises hit by the pandemic.

China Merchants Bank surged 5.7 per cent to HK$46.95, and has now clawed back almost half of the US$35 billion rout following the removal and corruption probe of its former top executive.

Author: Zhang Shidong, SCMP

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