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

Hong Kong stock market

Zhang Shidongin Shanghai

Published: 10:54am, 19 Aug, 2022

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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.”

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The People’s Bank of China on Monday unexpectedly cut its policy rates by 10 basis points, the first reduction since January, after government reports showed the economy lost momentum in July. Premier Li Keqiang this week called for stronger tonic from major provincial governments to revive growth.

Limiting the gain on the broader market, NetEase slid 6.3 per cent to HK$133 as the worst performer on the benchmark after second-quarter earnings matched analysts’ estimates.

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Trading remained volatile this week, with corporate earnings in focus after results from index heavyweights including Tencent, Geely Automobile and Hong Kong Exchanges and Clearing trailed market expectations. Smartphone maker Xiaomi and lender China Merchants Bank were due to publish their interim report cards later on Friday.

Silicon producers gained on expectations prices will increase after southwest Sichuan province, a major area for producing silicon and lithium salt, cut off electricity supply to factories to favour supply to households amid an unprecedented heatwave.

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Tongwei jumped 4.9 per cent to 59.96 yuan in Shanghai and GCL Technology Holdings rallied 2 per cent to HK$3.05 in Hong Kong. Tianqi Lithium, Asia’s second-largest lithium compound producer, dropped 4.1 per cent in Shenzhen and 3.4 per cent in Hong Kong on concern about rising costs of lithium sales.

Grocery distributor Swang Chai Chuan surged 41 per cent to HK$0.79 on the first day of trading in Hong Kong.

Other major markets in Asia all rose, except South Korea where the Kospi index slipped 0.6 per cent. Japan’s Topix index added 0.2 per cent and Taiwan’s Taiex gauge rose 0.1 per cent, with traders waiting for more signals for the pace of the interest-rate increase by the US Federal Reserve.