Hang Seng recoups US$128 billion of market value as stock index advances for third day on China easing bets

  • Hang Seng Index heads for the longest winning streak in three weeks as Chinese tech, property and casino stocks extend gains
  • Government report shows factory-gate prices in mainland China slowed last month from a 26-year high in October

Hong Kong stocks climbed for a third day after a government report showed China’s factory-gate inflation slowed last month from a 26-year high, bolstering the case for more policy easing to support the faltering economy.

The Hang Seng Index rose 0.9 per cent to 24,210.02 at the local noon trading break on Thursday. The Tech Index rallied 2.1 per cent, while China’s Shanghai Composite Index added 1 per cent.

Alibaba Health Information Technology surged 5 per cent as the biggest gainer on the Hang Seng Index. China Resources Land and Longfor Group appreciated more than 3 per cent, leading the pack among mainland Chinese developers.

The three-day winning streak, the longest in three weeks, has added back about US$128 billion of value to the index’s 64 members. This week’s rebound also lifted the index’s price to book value to par, after trading at a discount over the past eight days, according to Bloomberg data.

“Measures such as ensuring energy supply and stabilising prices are working,” HSBC Jintrust Fund Management said in a note to clients. “Prices in some raw materials have dropped significantly. Looking ahead, we are cautiously positive on stocks.”

Producer prices rose 12.9 per cent in November from a year earlier, versus 13.5 per cent in October, China’s statistics bureau said on Thursday. Consumer prices rose 2.3 per cent, slower than market consensus, versus 1.5 per cent in October.

Easing price pressure underpins the central bank’s decision to cut banks’ reserve-requirement ratio for a second time this year, as economic recovery lost momentum over the past two quarters. Sentiment on the property market also soured as home prices declined and funding dried up for indebted developers like China Evergrande.

The Hang Seng Index remained 11 per cent below its value at the star of the year, the worst performer among the world’s major stock benchmarks. Regulatory crackdown, earnings misses by tech juggernauts and a clampdown on gambling in Macau all combined to roil investors.

Local stocks also got a boost from gains in global equities. Traders are getting more upbeat that the Omicron will not derail economic recovery. Pfizer said that a third shot of Covid-19 vaccines will “do the job” in the fight against the new variant.

Elsewhere, Xinyi Solar and Xinyi Glass both slid 0.3 per cent in Hong Kong after US lawmakers passed a bill that bans imports of goods from China’s Xinjiang region on forced labour allegations.

Ningbo Homelink Eco-iTech, a maker of plastic products, jumped 33 per cent above its initial public offering price in Shenzhen.

Author: Zhang Shidong, SCMP

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