HK stocks soar by most since July 2020 as Alibaba, developers rally on China rate cuts, spending stimulus

21-Jan-2022 Intellasia | South China Morning Post | 5:02 AM Print This Post

Hong Kong stocks surged by the most in 18 months after China cut a key lending rate for a second time in a month and stepped up infrastructure spending to prop up growth. Alibaba Group Holding led gains among tech peers.

The Hang Seng Index advanced 3.4 per cent on Thursday to a two-month high. The Tech Index jumped 4.5 per cent, the most in a week, while the Shanghai Composite Index slipped 0.1 per cent. The MSCI China Index, the broadest measure of onshore and offshore stocks, has gained $25 billion in value this week through Wednesday.

Property developers led Thursday’s rally on optimism cheaper and freer flow of credit will alleviate an industry-wide liquidity crunch and revive home sales. China is drafting rules that will make it easier for developers to access proceeds from presales of homes, according to media reports.

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“The new cycle of easing has come as expected,” said Xu Chi, an analyst based in Shanghai at Zhongtai Securities. “We should remain positive on the stock market” as risk appetite is set to improve, he added.

China’s one-year loan prime rate, set on the 20th every month, fell by 10 basis points to 3.7 per cent, according to central bank data. The rate was trimmed by five basis points on December 20, the first decline since April 2020. The five-year rate fell five basis points to 4.6 per cent on Thursday, the first since April 2020.

Country Garden Services surged 15.5 per cent, while its former parent Country Garden rallied 4.3 per cent and Longfor gained 2.5 per cent. Alibaba, the owner of this newspaper, jumped 5.9 per cent and Tencent Holdings added 6.6 per cent despite trading without entitlement to special interim dividends.

The Hang Seng Mainland Properties Index, which tracks the performance of Chinese developers traded on the Hong Kong stock exchange, rose 4.6 per cent as easier credit outlook buoyed indebted builders like China Evergrande, Kaisa Group and Shimao.

“Monetary loosening is necessary, considering that real estate is a slow variable and it may take time for fiscal expansion to become effective,” analysts led by Huang Wenjing at China International Capital Corp wrote in a report.

Separately, China will extend its high-speed rail line nearly 32 per cent by 2025, roughly equal to the combined length of the next five largest countries by network size, as it turns to infrastructure spending to stabilise growth.

Elsewhere, PetroChina slid 1.7 per cent after the oil producer said that a unit was found to have violated rules in oil trading by China’s auditing administration.

AAC Technologies tumbled 12.7 per cent to more than a one-year low. The maker of acoustic components forecast a decline of as much as 16 per cent in 2021 profit due to smaller forex gains and fewer state subsidies.

Chengda Pharmaceuticals, a Zhejiang province-based drug maker, jumped 58 per cent from its initial public offering price on the first day of trading in Shenzhen.


Category: Hong Kong

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