HK and Chinese stocks rally as economic data signals growth likely to pick up

18-Jan-2020 Intellasia | South China Morning Post | 6:02 AM Print This Post

Hong Kong and China stocks advanced, with the city’s benchmark closing at its highest level in eight months, as December economic data suggested growth in the Asian nation may have troughed.

The Hang Seng Index rose 0.6 per cent to 29,056.42 on Friday, the highest level since May 7. The Shanghai Composite Index added 0.1 per cent to 3,075.50, snapping a 1.3 per cent loss over the past three days.

Traders looked beyond the headline numbers, which showed China’s growth sliding to the slowest pace in 29 years in 2019, to focus on positive clues on the health of the world’s second-largest economy. The official report released by the statistics bureau on Friday showed that industrial production and retail sales beat estimates in December, boosting confidence among investors including JPMorgan Asset Management.

“Monthly data showed that economic activities, including retail sales, industrial production and fixed-asset investment, have bottomed out in December,” said Zhu Chaoping, a Shanghai-based strategist at the money manager. “The economic data suggests that the countercyclical policies have come into play. More importantly, the uncertainties faced by corporates are diminishing along with the progress in US-China trade negotiation since December.”

Industrial output increased 6.9 per cent from a year earlier last month, exceeding the estimate of 5.9 per cent growth in a Bloomberg poll, while retail sales rose 8 per cent, beating the projection of a 7.9 per cent increase.

Still, Zhu cautioned that there remains the risk of the government trimming its stimulus measures by tightening its grip on financing by local governments and continued controls on the property market, as the economy stabilises.

Shandong Lukang Pharma and other Chinese drug makers climbed after the central city of Wuhan reported one more death linked to the newly discovered strain of coronavirus.

Lukang Pharma, which makes products including antibiotics, surged 5.4 per cent to 7.77 yuan, Jiangsu Lianhuan Pharmaceutical climbed by the 10 per cent daily limit to 9.13 yuan and Guilin Layn Natural Ingredients gained 3.1 per cent to 8.27 yuan. A gauge of pharmaceutical stocks on the CSI 300 Index advanced 1.6 per cent as the best performer among all the industry groups.

Wuhan had reported a total of 41 pneumonia cases caused by the virus, with 12 already discharged from hospitals and five still in critical condition, the city’s health commission said in a statement on Thursday.

Lithium battery maker Guoxuan High-tech jumped by the maximum daily limit of 10 per cent to 18.79 yuan after Reuters reported that Volkswagen plans to take a 20 per cent stake in the company in coming weeks.

Global fund managers could spend a combined 300 billion yuan (US$43.7 billion) buying Chinese equities via the stock connect programme with Hong Kong this year, according to Citic Securities. Money managers will raise the representation of Chinese stocks in the portfolios of their active funds to equal-weight from underweight, and passive exchange-traded funds may increase buying due to launches of new products, the brokerage said in a report dated Friday.

In Hong Kong, smartphone maker Xiaomi jumped 8.4 per cent to HK$13.24, its highest level since December 2018, on optimism that Chinese users will switch to new mobile phones based on the 5G technology and the stock will be included as a constituent of the Hang Seng Index.


Category: Hong Kong

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