Hong Kong stocks hover near two-week high as investors assess Xi-Biden talks

• Blue chips Haidilao and Meituan lead declines with losses of at least 4.2 per cent
• China leaves its loan prime rate unchanged for March, after cutting it in December and January

Hong Kong stocks wavered near a two-week high, as investors weighed the talks between President Xi Jinping and his US counterpart Joe Biden. Traders were disappointed by China’s decision to leave a key lending interest rate unchanged.

The Hang Seng Index slipped 0.1 per cent to 21,394.27 at the noon break on Monday, erasing an intraday gain of as much as 1.9 per cent. The Hang Seng Tech Index was unchanged and the Shanghai Composite Index of Chinese onshore stocks climbed less than 0.1 per cent.

Chinese chain hotpot restaurant operator Haidilao International Holdings, property developer Country Garden Holdings and Meituan were among the biggest decliners, falling more than 4 per cent.

Trading remained choppy even after a roller-coaster ride last week. Implied swing of the Hang Seng Index jumped to a two-year high last week, with sentiment swayed by panic selling and dip buying. The Hang Seng Index ended the week up 4.2 per cent, the first weekly gain in a month, after top officials from Beijing soothed investors by pledging to stabilise economic growth and stocks, and resolve the regulatory risk of Chinese companies listed in the US.

In a video conference on Friday, Xi told Biden that China does not want the Russia-Ukraine war to exacerbate, adding that Beijing stands for peace and opposes war. Biden, in turn, said that the US had no intention of seeking conflict with China and will not support Taiwan’s independence, according to the Xinhua News Agency.

Traders were disappointed that China kept its loan prime rate unchanged for March. The key lending benchmark saw two consecutive cuts in December and January.

“China has probably disappointed markets slightly, leaving the loan prime rate unchanged,” said Jeffrey Halley, an analyst at Oanda. “The talks between President Xi and Biden last week were notable for the fact that they didn’t vehemently disagree, not for any concrete progress on a multitude of issues.”

Separately, Hong Kong will ease its lockdown measures starting next month, lifting the ban on some flights, reducing the quarantine period for arrivals and relaxing some of the social-distancing rules in phases, Chief Executive Carrie Lam Cheng Yuet-ngor said on Monday.

Concerns about a faltering recovery in global growth lingers as crude oil climbed 3 per cent to US$107 a barrel. Surging commodity prices complicate the monetary policy of the Federal Reserve, which started last week to raise the benchmark interest rate by 25 basis points to tame inflation.

“Markets remain unsettled,” said Clifford Bennett, chief economist at ACY Securities. “The very strong equity market rally looks like it can continue, but in the background, the slowdown and food and energy price shocks globally are only just beginning.”

Haidilao tumbled 6.9 per cent to HK$12.90 for the worst performance on the Hang Seng Index, as some of China’s biggest cities including Shanghai and Shenzhen were affected by the most severe outbreak of Covid-19 in two years.

Other big decliners included Country Garden, which lost 4.4 per cent to HK$5.38 and Meituan, which fell 4.2 per cent to HK$146.90.

Author: Zhang Shidong, SCMP