China stocks advance by most in 6 weeks on policy easing speculation while Hang Seng surrenders gain

  • China’s economy lost further momentum last quarter, fuelling hopes for more policy support and rate cuts to stabilise growth
  • Several Macau casino operators surrender some of their two-day gains from last week’s regulatory boost

Stocks in mainland China advanced by the most in six weeks on optimism policy-easing measures will help shore up economic growth and fuel risk appetite. Equities in Hong Kong wavered.

The Shanghai Composite Index added 0.9 per cent to 3,574.89 at the midday trading break, on track for its steepest gain since December 8. The Hang Seng Index slipped 0.1 per cent, giving up an intraday gain of as much as 0.7 per cent, while the Tech Index rose 0.4 per cent.

A sub-index tracking energy and raw-material producers rose almost 2 per cent, pacing the rally in the onshore market. In Hong Kong, Alibaba Group Holding, the owner of this newspaper, slipped 0.3 per cent and Tencent Holdings lost 1.2 per cent.

China’s central bank on Monday lowered the rate on medium-term lending facility (MLF), a tool to finance commercial lenders, anchoring expectations for more stimulus to shore up growth. The focus will be on loan prime rates, a key market-based lending rate set on the 20th of every month that was trimmed in December for the first time since April 2020.

“The cut [in the MLF rate] clearly sends a signal of easing, which is helpful to lower corporate funding costs and reverse the pessimistic expectations,” said Shen Chao, a strategist at HSBC Jintrust Fund Management in Shanghai. “For the stock market, the cut in the interest rate could reverse the current downtrend.”

In Hong Kong, property stocks climbed 0.8 per cent on average, the only winning industry subgroup within the benchmark index. Cheaper credit will aid a recovery in China’s home sales. Country Garden and China Overseas Land & Investment gained more than 2 per cent.

Country Garden Services, the property management unit of its namesake parent, added 0.5 per cent after saying that it dropped a plan to sell US dollar bonds and pledged to be more “financially independent” from the holding company.

Macau casino operators weighed on the broader Hong Kong market as a rally, sparked by a regulatory boost on concession extension, came to a halt. Sands China slipped 1.7 per cent after jumping 23 per cent over the past two days and Galaxy Entertainment Group lost 1.9 per cent.

Two stocks started trading in mainland China. Meat processor Jiangsu YiKe Food Group surged 192 per cent from the initial public offering price while Mabwell (Shanghai) Bioscience, which makes antibody drugs, tumbled 28 per cent.

Other major markets in Asia-Pacific were mixed, with stocks in Japan rising and shares in South Korea and Australia falling as investors assessed the prospect of a strong global recovery from the pandemic and concerns stoked by rising US government bond yields.

Author: Zhang Shidong, SCMP

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