Hong Kong Markets Are Primed for a Positive Start After Holidays

  • Solid profits, latest Fed speak allaying fears of another rout
  • Golden Dragon China Index has rallied 8% during the holidays

Hong Kong’s stocks are primed to play catchup on Friday, following gains on Wall Street and in Chinese names listed in the U.S. during the Lunar New Year holiday.

The city’s equities should benefit from signs that the Federal Reserve won’t be rushed on rate-hikes, and from a more upbeat picture of corporate earnings this week, though disappointing forecasts from the likes of Meta Platforms Inc. may temper any advance.

The Nasdaq Golden Dragon China Index – which includes many large Chinese technology companies – has jumped 8% since Hong Kong shares last traded at midday Monday, helped in part by encouraging commentary from the country’s cyberspace watchdog.

“Hong Kong stocks can do some catchup,” said Margaret Yang, a strategist at DailyFX who expects a higher open on Friday. “The medium- to long-term outlook is also improving, given that valuations are cheap and China’s regulatory policies have started easing.”

Post-holiday jumps for equity benchmarks in Seoul, Singapore and Kuala Lumpur on Thursday have added to expectations for a positive open in Hong Kong. Mainland China markets will reopen on Monday.

Yet there are significant threats to a sustained recovery in Hong Kong and mainland stocks, even as an increasing number of global banks turn bullish on them.

Some investors continue to sell into rallies, China’s property market distress remains acute and the slowing pace of economic growth continues to weigh. Positive statements toward the technology sector have yet to undo the damage inflicted on the business models of many internet platforms over the past year.

On top of all this, the mainland’s CSI 300 Index entered a bear market last week despite Beijing’s efforts to bolster confidence going into the holiday, and the central bank’s earlier pivot to stimulus.

Hong Kong’s Hang Seng Index had fallen into a bear market much earlier, in August, and remains down more than 20% from its peak in February last year.

Authors: Abhishek Vishnoi, Ishika Mookerjee, Bloomberg

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