Hong Kong, China stocks get boost from trade talks, Beijing signals on consumption stimulus

  • China carmakers and home appliance makers rally after a top official says policies are coming to boost consumption
  • US trade talks get an extra day, buoying investor sentiment
PUBLISHED : Wednesday, 09 January, 2019, 10:21am
UPDATED : Wednesday, 09 January, 2019, 5:17pm

Hong Kong and mainland stocks rallied Wednesday, as the US and China appeared to make progress toward ending their trade war and a Beijing official indicated new policies are coming to boost domestic consumption.

The Hang Seng Index rose 2.3 per cent, or 586.87 points, to 26,462.32, while the Hang Seng China Enterprises Index gained 2.2 per cent, or 224.47 points, to 10,358.21.

On the mainland, the Shanghai Composite was up 0.71 per cent, or 17.89 points, to 2,544.35, and the CSI 300 of large caps rose 1 per cent, or 30.78 points, to 3,078.48.

Stocks from Geely Automobile Holdings in Hong Kong to mainland-listed appliance maker Midea Group rallied after Ning Jizhe, deputy chief of China’s top planning body, said policymakers will roll out policies to boost consumption of cars and home appliances.

Meanwhile, trade talks between the US and China in Beijing ended Wednesday, with a US delegate saying,“it’s been a good one for us.”

US-China trade war talks end on a positive note, as American delegate says they went ‘just fine’

Adding to optimism was an earlier tweet by President Donald Trump, exclaiming “Talks with China are going very well!”

US stocks rallied overnight on the back of the positive sentiment. All three major indices ended higher.

“The Sino-US talks are progressing well and boosted the sentiment of the market,” said Louis Tse Ming-kwong, managing director of VC Asset Management. “This kind of euphoria will cover tomorrow’s trading as well.”

The Hang Seng will bob around its current level until Chinese New Year in the first week of February, he predicted.

Regarding Beijing’s policy announcement to boost consumption, “actions are louder than words,” said Tse. “The first thing they want to do is rouse spirit. In China, the economy is gradually declining so you have to say something to boost the morale, but we want to see action.”

Investors are in their first full week of trading of the new year, hoping to put the nightmarish 2018 behind them. The Hang Seng Index ended down 15 per cent for 2018 while the Shanghai Composite Index fell 25 per cent, making it the worst performing major market in the world. While traders remain cautious and the kick-off to the new year has been rocky, both the Shanghai and Hang Seng benchmarks are in positive territory.

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On a less positive note, the World Bank cut its forecast for the global economy in a semi-annual update to its outlook, citing the threat of “disorderly” market movements and escalating trade disputes as heightening risk.

The Washington-based bank forecast 2.9 per cent global growth this year, down from 3 per cent. For emerging markets, it lowered growth projections by 0.5 points to 4.2 per cent.

Meanwhile, billions of Xiaomi shares were unlocked for sale on Wednesday, marking an end to the smartphone maker’s IPO lock-up since the company listed on July 13.

Xiaomi closed down 6.85 per cent to HK$10.34, its lowest level since debuting on the Hong Kong stock exchange.

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On Tuesday JPMorgan lowered its target price for Xiaomi by 42 per cent to HK$10.5 and downgraded its rating from “neutral” to “overweight”. Deutsche Bank also lowered theirs by 13 per cent to HK$18.6, but maintained its “buy” rating.

Xiaomi stock has dropped 20 per cent in the new year, underperforming its peers. The information technology hardware sector is down 2.5 per cent so far this year.

Great Wall Motor surged 9.28 per cent, to HK$4.71, closing at its highest level since December 14. Its mainland-traded stock surged by the 10 per cent daily limit to 6.25 yuan.

The Chinese carmaker signed a memorandum of understanding with Israel-based technology firm Mobileye, to develop autonomous driving systems for China. In addition, on Tuesday, the carmaker reported good sales. Total sales volume for the company in December 2018 was 133,794 units, a year-on-year increase of 6.54 per cent. Total production volume was 135,800 units, a year-on-year increase of 14.14 per cent.

A customized index of major Hong Kong-listed Chinese automakers rose 1.8 per cent on Wednesday, its steepest gain since December 13.

Geely Auto was up 8.41 per cent to HK$11.08, Brilliance China Automotive Holdings gained 1.64 per cent to HK$6.18 and Zhongsheng Holdings rose 1.76 per cent to HK$15.00.

In the mainland, Shenyang Jinbei Automotive jumped 10 per cent to 3.50 yuan and SAIC Motor added 3.7 per cent to 25.20 yuan. Hangzhou Robam Appliances, China’s biggest maker of kitchen ventilators, surged 6.7 per cent to 22 yuan and Midea, the nation’s most valuable appliances maker, rose 5.8 per cent to 39 yuan.

China Life Insurance and AIA Group led gains among insurers after Daiwa Research lifted its share-price estimates on the two stocks. China Life was the leader in the financials sub-index, up 3.62 per cent to HK$17.18, while AIA was up 2.97 per cent to HK$65.90 in its highest level since December 4.

CK Asset rose 1.76 per cent to HK$63.60, its highest level since June 26, on news that the property developer plans to convert its Harbour Plaza Resort City hotel in Hong Kong’s New Territories into Hong Kong’s densest housing estate. It is to have 5,000 flats and two 53-storey residential towers, according to a document filed with the town planning board.

CK Asset plans to convert hotel site into Hong Kong’s biggest housing estate of the last decade, with up to 50 flats on every floor

Meituan Dianping also shot up 3.87 per cent to HK$45.60 after the Chinese e-commerce platform announced it had signed an agreement with automotive supplier Valeo from France, AI computing firm NVIDIA from the US and automotive designer Icona from Italy, to boost its autonomous delivery.

Additional reporting by Zhang Shidong and Laura He.