Alibaba, Tencent lead market rebound on China rate-cut hopes after slowdown hits corporate earnings

China’s biggest commercial banks are expected to cut their lending rates at this month’s setting, according to market consensus

Orient Overseas surges more than 6 per cent after profit doubled, and Xiaomi and China Merchants also log gains before their interim report cards later Friday

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The Exchange Square Complex, which houses the Hong Kong Stock Exchange, in Hong Kong, on July 13, 2022. Photo: Bloomberg

Published: 10:54am, 19 Aug 2022Updated: 4:40pm, 19 Aug 2022

Hong Kong stocks rebounded from a one-week low on speculation China’s biggest lenders will cut their lending rates next week to help shore up the economy, taking the cue from the central bank’s first policy rate cut since January.

The Hang Seng Index rose 0.1 per cent to 19,773.03 at the close, trimming the loss this week to 2 per cent. The Tech Index was almost unchanged while the Shanghai Composite Index dropped 0.6 per cent.

Alibaba Group Holding climbed 1.4 per cent to HK$89.50 while Tencent Holdings gained 0.8 per cent to HK$315. Orient Overseas jumped 6.5 per cent to HK$235 after posting first-half profit that doubled from a year earlier and proposing higher interim dividend payouts. Property developers Country Garden and China Overseas Land & Investment climbed by at least 2.1 per cent.

China’s one-year loan prime rate may drop by 10 basis points to 3.6 per cent, according to estimates from economists tracked by Bloomberg. The five-year rate will probably be cut by the same magnitude to 4.35 per cent. Both rates are set on the 20th of each month by aggregating levels quoted by 18 commercial banks. The one-year rate has been kept unchanged since January, while the five-year one was last reduced in May.

“There’s a need for policymakers to step up growth-stabilising measures and keep monetary policies loose,” said Pan Yuxin, an analyst at Wanhe Securities. “The market remains cautious on the economic recovery outlook, given weak demand for loans, new Covid outbreaks and inflation abroad.”