Hong Kong and China stocks poised for continued upbeat momentum as traders drift back to work after lunar holiday
- Shanghai Composite Index enjoys the best monthly performance in a year, partially reversing its world-beating decline in 2018
- The MSCI will release its decision on whether to increase weightings of China stocks in global indices by the end of February
- Hong Kong stocks to resume trade on Friday, while markets in Shanghai and Shenzhen will reopen on Monday
China’s stocks posted their best monthly performance in January in a year, as the world’s biggest emerging equity market recovered from the world-beating decline in 2018.
The Shanghai Composite Index rose 3.6 per cent last month, the biggest gain since January 2018. Equities were buoyed by beaten down valuations, detente in the China-US trade friction and the prospects of inflows from foreign investors.
While most strategists made the call that China’s stocks would bounce back late in the year, the rebound is already in full swing. Foreign buying can account for part of the gains, as overseas traders buy before a decision by MSCI on whether to triple the weightings of Chinese stocks in its global gauges by the end of the month.
Foreigners bought a net of 66.4 billion yuan (US$9.85 billion) of the mainland-traded stocks in January through the exchange link programme with the Hong Kong bourse.
Traders have also temporarily looked past the trade dispute between China and the US, ahead of a 90-day truce that ends on March 1. A high-level talk that concluded last week in Washington appeared to be positive, with China promising to increase imports of American goods and the US saying progress had been made.
“There’s more room for the rebound as foreign capital keeps flowing in and domestically policymakers step up policy support,” said Dong Zhongyun, an analyst at Avic Securities. “But the economic fundamentals don’t support a reversal of the general trend.”