Hong Kong stocks: index hits 9-month highs, tops 19,000 on earnings optimism and policy support hopes
- First-quarter profit for Tencent probably rose 34 per cent from a year ago, Alibaba may log a fall of 39 per cent, less than the previous quarter, as per analysts’ estimates
- The weekend’s weak credit data adds to the probability of a surprise cut for this Wednesday’s medium-term lending facility rate, according to ING
The Hang Seng Index rose 0.6 per cent to 19,115.06 at close to finish at its highest since August 10. The Hang Seng Tech Index added 1.4 per cent but the Shanghai Composite Index retreated 0.2 per cent.
Alibaba Group Holding rallied 4.1 per cent to HK$81.15 and Tencent Holdings climbed 1.9 per cent to HK$378.20, ahead of their quarterly earnings announcements, due on Tuesday. Biopharmaceutical firm Wuxi AppTec advanced 4.5 per cent to HK$39.80, after the US introduced a revised bill that offers a grace period until 2032, before a possible ban on Chinese drug makers from doing businesses with the Federal government.
Casino operator Sands China gained 4.2 per cent to HK$20.90 after a move to add eight more mainland cities to a programme that allows individual travellers to visit the gambling hub of Macau. Currently, travellers from these cities can only visit Macau as part of official tour groups.
“There is more upside for Hong Kong stocks as China keeps loosening the restrictions on the property market and as corporate earnings outlook has improved,” said Fang Yi, an analyst at Guotai Junan Securities in Shanghai.
The Hang Seng Index has extended its world-beating rally from April, rising more than 7 per cent this month, after key cities like Hangzhou and Xian scrapped all the curbs on home purchases support for the property market gathered pace nationwide. Exports and imports both exceeded the consensus estimates last month.
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Corporate earnings outlook is also driving the run-up. First-quarter profit for Tencent probably rose 34 per cent from a year ago, while that for Alibaba may have fallen 39 per cent, lower than the 69 per cent slump for the previous three-month period, according to the estimates of the analysts tracked by Bloomberg.
China’s aggregate financing, the broadest measure of credit supply, fell by almost 200 billion yuan (US$28 billion) in April from the preceding month, according to data from the central bank released on Sunday. That marked the first such decline since late 2005, according to Goldman Sachs.
“This very weak credit growth may indicate that real interest rates remain too high for the current strength of the economy,” said Lynn Song, ING’s chief economist, Greater China. “The market’s baseline case for this Wednesday’s medium-term lending facility rate remains no rate cut, as previous hints pointed to RRR cuts prior to a rate cut, but the weekend’s data add to the probability of a surprise rate cut.”
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The rally in Hong Kong stocks will be put to test this week by key China economic data for April. Home prices and industrial production data is due on Friday and will offer investors clues on the strength of the recovery.
Elsewhere, Reach Machinery, which makes transmission parts and brakes for robots and automated production lines surged 168 per cent to 69.41 yuan on the first day of trading in Shenzhen.
Other major Asian markets were steady. Japan’s Nikkei 225 slipped 0.1 per cent and South Korea’s Kospi eased less than 0.1 per cent, while Australia’s S&P/ASX 200 was almost unchanged.
