Hong Kong stocks climb as buyers pile in after US$97 billion tech rout and China pledges to temper wild price swings

  • Stocks advance, trimming weekly loss, as traders see bargain among beaten down Chinese tech companies
  • Hang Seng Index members have been trading below their book value for 20 straight days

Hong Kong stocks rose for a second day, trimming losses in the week, as traders continued to load up Chinese tech companies on valuation appeal. Chinese market regulator also pledged to prevent wild swings in prices.

The Hang Seng Index added 1.2 per cent to 23,337.96 at the local midday trading break, narrowing the decline this week to 0.3 per cent. A late surge on Thursday lifted the market from near a 21-month low. The Hang Seng Tech Index advanced 0.8 per cent, and China’s Shanghai Composite Index climbed 0.4 per cent.

Tencent Holdings rose 1.3 per cent while JD.com advanced 3.2 per cent. Alibaba Group Holding, which owns this newspaper, jumped 3.8 per cent. Kuaishou Technology, Bilibili and Baidu all gained by at least 0.6 per cent.

“In the long run, technology growth is inevitable to realise ‘common prosperity’ and strengthen competition amid US-China tensions,” said Zhang Qiyao, an analyst at Industrial Securities. “The pullback in tech stocks was mainly due to the disruption from positions, sentiment and investment styles.”

Buyers returned after a sell-off that erased more than US$97 billion of market value in technology stocks. Values emerged as the 64 members of the Hang Seng Index trade at a 3 per cent discount to their net asset value, according to Bloomberg data. Their price-to-book value has also slipped below 1 for 20 straight days.

Meanwhile, the China Securities Regulatory Commission aims to stabilise markers and prevent wild price swings after a rocky start in onshore and offshore Chinese stocks in the new year, state-run broadcaster CCTV said, its chairman Yu Huiman.

Montreal-based BCA Research warned that there was a 70 per cent chance about a significant contraction in earnings for Chinese companies amid the economic slowdown, posing a threat to risk assets.

Chinese property developers rallied on speculation their mergers and acquisitions will be exempted from the stringent rules under Beijing “three red lines” policy, which caps leverage and debt-funded expansion. China Overseas Land and Investment surged 6.9 per cent and China Resources Land rallied 6.4 per cent.

Shimao Group bucked the rally on Chinese property stocks, tumbling 7 per cent after one of its units defaulted on a 645 million yuan (US$101 million) trust loan due December 25.

Software developer Beijing Sunway World Science & Technology jumped 109 per cent from the initial public offering price to 63.19 yuan on the first day of trading in Shenzhen. Jiangsu Yahong Meditech slumped 19 per cent on its Shanghai debut.

Author: Zhang Shidong, SCMP

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