Hong Kong stocks rise to four-week high with gains in Meituan, Alibaba as Shanghai prepares to exit lockdown

  • Stocks extend Friday’s rally on corporate earnings support as Meituan prepares to report its quarterly results on June 2
  • Optimism abounds as Shanghai unveils a 50-point plan to reopen and repair economy after two months of lockdown

Hong Kong stocks climbed to a four-week high on improved market sentiment as Shanghai unveiled a 50-point plan to exit from a two-month lockdown after Covid-19 cases fell to new low. Meituan jumped before its earnings report this week.

The Hang Seng Index gained 1.9 per cent to 21,084.54 at the local noon trading break, set for the highest close since May 3, while the Tech Index advanced 3.1 per cent. The gains helped reduce the losses on the two gauges to less than 0.1 per cent and 3.4 per cent, respectively. Stocks in Shanghai added 0.3 per cent.

Alibaba Group Holding jumped 2.1 per cent to HK$92.90, taking the rebound to 15 percent in two days. Meituan rallied 7.3 per cent to HK$175.90, even as analysts forecast the food-delivery platform operator to report a wider net loss in the quarter to March 31. Li Ning and Haidilao also surged by at least 7 per cent.

The Shanghai government on Sunday announced key steps to repair its US$637 billion economy as officials get ready to gradually end the lockdown from June 1. They included scrapping approvals for factory production, subsidy for car purchases, grace period for tax payments and spending coupons to boost consumption.

“With production resumption in Shanghai proceeding steadily, we expect widespread supply chain disruptions to ease in the coming month,” said Meng Lei, a strategist at UBS in Shanghai. “Given the recent increase in policy support and the relatively loose macro liquidity conditions, we believe market valuation has bottomed.”

Shanghai’s impending reopening has stoked debates about China’s stop-start economy, forcing some investors to dump Chinese stocks on concerns about corporate earnings outlook. Profits at China’s industrial firms fell 8.5 per cent in April from a year earlier, swinging from a 12.2 per cent gain in March.

Premier Li Keqiang highlighted the severity of the economic situation last week, taken as a sign that policy easing measures will gain momentum. The 66 members on the Hang Seng Index are valued at 7.6 times earnings, the cheapest after Brazil among the world’s major benchmarks, according to Bloomberg data.

Stock revival in recent days followed a rousing week of trading on the back of earnings support from Baidu and Alibaba Group, the owner of this newspaper. US fund Dodge & Cox, for example, have made more than US$1.2 billion in net purchases of Chinese tech stocks over the past four quarters on valuation bet.

Hong Kong stocks also received a boost after an agreement to add exchange-traded funds to the Stock Connect scheme, a cross-border trading link between the city and bourses in Shanghai and Shenzhen.

Author: Zhang Shidong, SCMP

You might also like