Hong Kong stocks reach six-week high with gains in Meituan, Alibaba as Shanghai prepares to exit lockdown

Stocks added to Friday’s rally on corporate earnings support as Meituan prepares to report its quarterly results on June 2
Shanghai unveiled a 50-point plan to reopen and repair the city’s economy after two months of lockdown, fuelling optimism on recovery outlook

Hong Kong stock market

Zhang Shidongin Shanghai

Published: 10:48am, 30 May, 2022

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Hong Kong stocks climbed to a six-week high after Shanghai unveiled a 50-point plan to exit from a citywide lockdown as Covid-19 cases fell, fuelling recovery hopes. Meituan jumped before its earnings report this week.

The Hang Seng Index gained 2.1 per cent to 21,123.93 at the close of Monday trading, the highest level since April 14. The Tech Index surged 3.9 per cent. The gains helped erase the loss this month in the main index, and reduce the tech slide to 2.7 per cent. Stocks in Shanghai added 0.6 per cent.

Alibaba Group Holding soared 4.3 per cent to HK$94.40, taking the rebound to 17 per cent in two days. Meituan rallied 6.8 per cent to HK$175.10, even as analysts forecast the food-delivery platform operator to report a wider net loss in the quarter to March 31. Li Ning and Haidilao rallied 9 to 11 per cent.

The Shanghai government on Sunday announced key steps to repair its US$637 billion economy as officials get ready to gradually end the citywide lockdown from June 1. They included scrapping approvals for factory production, cash subsidy for car purchases, grace period for tax payments and spending coupons to boost consumption.

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“With production resumption in Shanghai proceeding steadily, we expect widespread supply chain disruptions to ease in the coming month,” said Meng Lei, a strategist at UBS in Shanghai. “Given the recent increase in policy support and the relatively loose macro liquidity conditions, we believe market valuation has bottomed.”

Shanghai’s lockdown since April 1 has stoked debates about China’s stop-start economy, forcing some investors to dump Chinese stocks on concerns about corporate earnings outlook. Profits at China’s industrial firms fell 8.5 per cent in April from a year earlier, swinging from a 12.2 per cent gain in March.

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About 89 per cent of all Chinese onshore and offshore firms have reported their earnings for the March quarter, Goldman Sachs said in a May 28 report. Earnings rose an average of 2 per cent, versus consensus estimates of 8 per cent for the MSCI China Index.

Premier Li Keqiang highlighted the severity of the economic situation last week, taken as a sign that policy easing measures will gain momentum. The 66 members on the Hang Seng Index are valued at 7.6 times earnings, the cheapest after Brazil among the world’s major benchmarks, according to Bloomberg data.

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Stock revival in recent days followed a rousing week of trading on the back of earnings support from Baidu and Alibaba Group, the owner of this newspaper. US fund Dodge & Cox has made more than US$1.2 billion in net purchases of Chinese tech stocks over the past four quarters on valuation bet.

Hong Kong stocks also received a boost after an agreement to add exchange-traded funds to the Stock Connect scheme, a cross-border trading link between the city and bourses in Shanghai and Shenzhen.

Additional reporting by Cheryl Heng

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