HK, China stocks rise after better-than-expected China factory data signals continued though slow recovery

01-Jul-2020 Intellasia | South China Morning Post | 6:02 AM Print This Post

Hong Kong and China stocks advanced after China’s official purchasing managers index (PMI) for June came in slightly better-than-expected, signalling continued slow recovery in the world’s second-largest economy.

The Hang Seng Index rose as much as 1.2 per cent to 24,598.61 on Tuesday, putting it on track to break a three-session losing streak. Communication services and health care led gains. The benchmark pulled back to a 0.3 per cent gain as of 3:05pm local time, as US futures pointed to losses amid growing concerns about coronavirus outbreaks in much of the country.

Index heavyweight Tencent rose as much as 2.9 per cent to briefly hit HK$500. That was the second time it has hit the milestone intraday. It did so last week, but the Chinese online gaming and social media giant could not hold that historic level at the close. As of Monday’s close, Tencent has been the Hang Seng’s second-top percentage gainer in 2020, rising 27 per cent. Sino Biopharmaceutical, a leading drug maker and distributor in China, has risen the most this calendar year, advancing on new drug approvals and Beijing’s ongoing push to improve health care for its 1.4 billion citizens. The stock advanced as much as 2.1 per cent in Tuesday trading.

Macau casino operator Galaxy Entertainment rose as much as 4 per cent as several technical signals suggested it is oversold.

Hong Kong Exchanges and Clearing, the city’s stock exchange operator, rose as much as 3.8 per cent, as investors continued to pile in as US-listed companies continue to seek secondary listings in the city. So far this year, it has gained about 26 per cent, making it the third top percentage winner on the 50-member index.

The index had gained 5.8 per cent this month as of Monday’s close, heading toward what looks like it will be its best and only second monthly gain for the year. In April, the city’s benchmark gained 4.4 per cent but it has declined nearly 14 per cent in 2020 and remains in bear territory.

On the mainland, the Shanghai Composite Index closed ahead by 0.8 per cent at 2,984.67.

In Shenzhen, the Nasdaq-style ChiNext advanced 2.8 per cent to its highest level since more than two years.

Other Asia benchmarks rose as well.

Japan’s Nikkei 225 rose 1.3 per cent, South Korea’s Kospi climbed 0.7 per cent while Australia’s S&P/ASX 200 advanced 1.4 per cent.

“The global economy unambiguously remains in a cyclical upswing, except for pockets of weakness,” said Stephen Innes, chief global market strategist at AxiCorp. “The better-than-expected China PMI lends further weight to the argument that a global cyclical recovery is well underway that should boost global stock market sentiment.”

Gold inched up to $1,772.92, with the $1,800 resistance level not seen since late 2011 remaining elusive. But the safe haven assets is on track to record for its best quarter since 2016 amid coronavirus-sparked uncertainties.

In mainland China, Hainan-based companies especially consumer stocks rose after Beijing revealed Monday various new measures to support building the island into a free-trade port. The maximum amount of free-duty shopping was raised to 100,000 yuan per person, and free-duty categories were also expanded, with electronic products included. China Tourism Group Duty Free Corp. soared by the daily cap of 10 per cent, as did HNA Infrastructure Investment Group.

Investors were heartened that China’s official PMI for June was 50.9, slightly higher than the median forecast in a Bloomberg survey. The gauge, with a reading above 50 suggesting growth in factory output, shows China’s economy is on track for further recovery. Both the manufacturing and non-manufacturing expanded in June at a faster pace than in May, another positive sign.

Traders are also watching souring relations between the US and China.

The US said on Monday that it will scrap preferential treatment to Hong Kong, including the previous privileges to import American defence equipment, and now the special territory, as is true of mainland China, is required to receive a license to import dual-use technologies. That news came before the National People’s Congress Standing Committee on Tuesday unanimously passed a sweeping national security law that is the latest source of friction between the world’s two largest economies.

Meanwhile, S&P Global Ratings confirmed China’s A+/A-1 ratings on Monday, and said its gross domestic product growth in the next three to four years will be higher than other medium-level income economies.

Investors are also watching the coronavirus pandemic closely. A recent outbreak on the mainland appears to be under control, with local confirmed cases in Beijing down to seven. But in the US, more than 30 states have seen an increase in infections, and some states are returning to lockdown restrictions.


Category: Hong Kong

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