Hong Kong stocks’ winning streak extends to third straight day after China signals cut in reserve requirement ratio
- Premier Li Keqiang said the reserve requirement ratio would be lowered ‘at an appropriate time’, prompting speculation that a cut was imminent
- Haidilao and Li Ning pace Hang Seng Index gainers, rising more than 5 per cent
Hong Kong stocks rose for a third day, capping the longest such streak in two weeks, after China signalled a cut in banks’ reserve requirement ratio to cushion the damage to the economy due to the stringent lockdown measures imposed in Shanghai and elsewhere.
The Hang Seng Index gained 0.7 per cent to 21,518.07 at the close on Thursday, paring the weekly loss to 1.6 per cent. The Hang Seng Tech Index and the Shanghai Composite Index each climbed 1.2 per cent. Hong Kong’s markets will be closed on Friday and Monday because of public holidays.
Haidilao International Holdings, Country Garden Services Holdings and Li Ning paced the gains in local stocks, rising at least 5.7 per cent. Alibaba Group Holding slid more than 3 per cent.
Premier Li Keqiang said in a weekly cabinet meeting on Wednesday that the reserve requirement ratio (RRR) would be lowered “at an appropriate time”, prompting speculation that a reduction could come as early this week. The previous two cuts in the ratio in July and December both came within days of similar hints from Li.
Goldman Sach expects China’s central bank to cut the RRR and potentially the policy interest rate in the next few days. The RRR will probably be slashed by 50 basis points this quarter along with a 10 basis-point reduction in the borrowing cost, it said.
Calls for further policy loosening have been growing as the Omicron coronavirus variant rattled the nation’s biggest cities and manufacturing hubs, such as Shanghai and Guangzhou, with local residents banned from leaving their houses and factories shut to contain the transmission.
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“Official economic support in terms of potential reserve requirement ratio cuts and incentivising lending related to housing will have minimal, short-term positive impact on activity so long as mobility restrictions last,” said Stephen Innes, a partner with SPI Asset Management. “However, the optimistic take is that once these restrictions end, the government will push spending hard to reach its [annual growth target].”
Local stocks also got a boost from the regional markets, which rose following a strong overnight rebound in US equities. Treasuries halted declines as bond traders pared bets on faster increases in borrowing costs by the Federal Reserve on expectations that inflation may have peaked.
Among the biggest gainers, hotpot restaurant operator Haidilao jumped 10 per cent to HK$16.16, Country Garden Services gained 6.5 per cent to HK$38.70 and Li Ning advanced 5.7 per cent to HK$63.95.
