HK stock traders lack conviction amid Covid-19 woes with valuation at decade-high while Asian markets build on vaccine rally

25-Nov-2020 Intellasia | South China Morning Post | 6:51 AM Print This Post

Hong Kong stock traders are struggling for conviction to add to a run-up that lifted the market to an eight-month high this month, amid resurgence in local Covid-19 cases. Most Asian markets gained.

The Hang Seng Index added 0.1 per cent to 26,498.67 at the midday break, after reaching the highest level since early March in a rally last week. The gauge traded at 14.6 times earnings, the most expensive in a decade, according to Bloomberg data. The Shanghai Composite Index slipped 0.1 per cent to 3,412.08.

Chinese smartphone maker Xiaomi retreated before the release of its quarterly earnings, while Alibaba Group Holding, the owner of the South China Morning Post, rose for a third day on a media report that more Hong Kong-listed companies will be added to the Stock Connect, a cross-border investment channel linking the city and the mainland.

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Hong Kong is racing against the clock to contain a “super-spreader” coronavirus cluster from dance clubs, as authorities seek to trace up to 1,000 people. The government on Monday confirmed 73 new infections, the most in three months.

Hong Kong will close more entertainment venues, chief executive Carrie Lam Cheng Yuet-ngor said at a weekly briefing on Tuesday, without elaborating. The government on Monday confirmed 73 new infections, the most in three months.

The Hang Seng Index’s advance of about 10 per cent this month has pushed the market valuation to the highest in a decade, based on the members’ average price-earnings ratio, according to data compiled by Bloomberg.

The dullness in both markets contrasted with a bullish trend in major Asian markets, where Japan’s Nikkei 225 rose more than 2.6 per cent and Australia’s S&P/ASX 200 jumped 1 per cent. They rallied in tandem with overnight gains in US equities.

Underpinning the sentiment was the success of the vaccine developed by AstraZeneca and the University of Oxford, which can prevent as much as 90 per cent of infection. That was close to the data from the other two candidate vaccines by Pfiser and Moderna. “The AstraZeneca news is the real deal,” said Stephen Innes, a strategist at Axi. “The health care world should be ecstatic. So now the question is, how much of the vaccine news is in the price?”

Xiaomi, China’s biggest smartphone maker, slipped 2.4 per cent to HK$26.95 before its quarterly earnings report later Tuesday. Third-quarter profit probably dropped 4.7 per cent from a year earlier, according to the estimates of analysts polled by Bloomberg.

Alibaba gained 3.3 per cent to HK$272.60., which rivals Alibaba in e-commerce, added 1.7 per cent to HK$350.40. Gaming company NetEase advanced 2.2 per cent to HK$151.80.

Hong Kong plans to expand the list of stocks available for trading by mainland investors and the move is expected to be unveiled by Lam in her policy address on Wednesday, Sing Tao reported, citing unnamed sources. Currently, companies with secondary listings and dual-share class structures are barred from the Stock Connect.

In the mainland, Zhejiang Supcon Technology, a maker of industrial automation control products, surged 197 per cent from its initial public offering price to 106.11 yuan on the first day of trading on the Star Market in Shanghai.


Category: Hong Kong

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