Tech stocks surge in Hong Kong with market recovery gaining traction as mainland buyers scoop up bargains
- Hang Seng Tech Index jumps more than 4 per cent, set for its best rally in a month as Alibaba halts losing streak
- Mainland Chinese funds have bought HK$1.6 billion worth of local stocks so far on Tuesday, the most in two weeks
Hong Kong stocks rebounded for a second day, as traders sought bargains in Meituan and other Chinese technology companies that sent the broader market to near a 10-month low last week.
The Hang Seng Index rose 1.6 per cent to 25,501.75 at the local noon break on Tuesday. The gauge rebounded 1.1 per cent on Monday after slipping into a bear market with a loss of more than 20 per cent from its February peak. The 30-member Hang Seng Tech Index surged 4.5 per cent and was headed for its best rally in a month.
The Shanghai Composite Index added 1 per cent after the central bank said that it will stabilise credit supply to support the economy and smaller companies.
Meituan and Tencent Holdings led gainers among Hang Seng Index members, rising by at least 4 per cent. Alibaba Group Holding, the owner of this newspaper, jumped 5 per cent to halt a nine-day losing streak to all-time low. Mainland investors returned with HK$1.6 billion (US$205 million) of net purchases through the Stock Connect link so far on Tuesday, on track for the biggest inflows in two weeks.
Local stocks rebounded on Monday as traders deemed last week’s 5.8 per cent sell-off, the biggest slump in 17 months, as excessive. The 14-day relative strength index readings for both the Hang Seng Index and the Hang Seng Tech Index dropped below 30 last week, signalling stocks were oversold and poised to advance. A switch to growth stocks from value plays were also seen.
“After the massive sell-off, it doesn’t make sense to be constantly bearish and it’s time to rebuild positions on cheaply valued technology, pharmaceutical and consumer companies with good quality,” said Ping An Securities in a research note.
The Hang Seng Index is the worst-performing among major global equity gauges this year as Beijing’s regulatory clampdown persists. The benchmark’s price-to-book ratio fell below one last week, according to Bloomberg data, suggesting that blue-chip stocks were trading below their intrinsic asset value.
Sentiment also got a boost after e-commerce group JD.com reported quarterly revenue that beat analysts’ projection. The stock surged 10 per cent to HK$268.20, heading for the biggest gain since July 29. Cathie Wood’s Ark Investment Management bought 164,889 of its American depository receipts on Monday.
Traders may derive more clues on the impact of Beijing’s regulatory crackdown on corporate earnings of tech companies in the coming days. Smartphone maker Xiaomi, Meituan and Kuaishou Technology are all due to release either quarterly or interim results this month.
Other equity gauges in Asia-Pacific also logged big gains in Tuesday trading, after expectations about more vaccinations drove US stocks to new highs. Traders are also waiting for the Jackson Hole symposium Thursday, which may provide clues for how and when the Federal Reserve plans to taper bond purchases.
Author: Zhang Shidong, SCMP