Hong Kong stocks surrender gain as Covid cases cloud China reopening efforts, growth impetus

Local stocks fell as Beijing faces challenges in flattening the infection curve amid reopening efforts
China vows to spur economic growth with sufficient liquidity, while the central bank promises stronger stimulus in 2023

US-listed Chinese stocks

Jiaxing Li

Published: 10:20am, 19 Dec, 2022

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Hong Kong stocks erased gains as China struggles to contain new Covid-19 infections, marring efforts to refocus on shoring up the nation’s economic growth with stronger policy support.

The Hang Seng Index dropped 0.5 per cent to 19,352.81 at the closing of Monday trading, overturning an earlier gain of as much as 1.7 per cent. The Tech Index lost 0.6 per cent while the Shanghai Composite Index slumped 1.9 per cent.

Macau casino operator Sands China tumbled 3.7 per cent to HK$24.95 while rival Galaxy Entertainment lost 4.5 per cent to HK$50.15. Alibaba Health lost 8 per cent to HK$7.41, while Chinese drug maker Hansoh Pharmaceutical and CSPC Pharmaceutical slipped by 6.4 and 4.1 per cent, respectively.

Since Chinese authorities began easing up on Covid-19 curbs, concerns about new infections have prodded residents to stock up on test kits and medicines as a precaution. Shanghai’s education authority said the city will shut most schools again from Monday to stem a new wave.

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“The pandemic situation in mainland China is very worrying, and the recent Covid spikes have impacted the market sentiment,” said Kenny Ng, strategist at Everbright Securities. “The Hong Kong market is still struggling near the 20,000 psychological level, but another big slump is unlikely this year.”

China’s National Health Commission reported 1,918 new cases on Monday, down from 2,028 the previous day. Nearly 1 million people in mainland China could die if the population is not protected by a fourth vaccination jab, the University of Hong Kong said in a study.

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The Hang Seng Index has risen 4.1 per cent so far in December on the back of continued China reopening optimism, which helped restore US$229 billion to the broader market in Hong Kong. Still, a 17.3 per cent loss so far this year means the benchmark is on course for its worst year since 2011.

Stocks had earlier begun the week brightly after President Xi Jinping and other senior officials vowed to revive consumption and support the private sector at the two-day Central Economic Work Conference that ended on Friday, signalling a shift in policy from its pandemic-fighting focus in recent years.

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“The conference emphasised that monetary policy should be ‘strong and accurate’ and added back the phrase ‘keeping liquidity at a reasonable and sufficient level’,” said Hong Hao, a strategist at Grow Investment in Hong Kong. “Interest-rate cuts should be expected, property will be supported, leverage will rise.”

China’s monetary stimulus in 2023 “will not be smaller than this year,” local media reported on Saturday, citing comments by Liu Guoqiang, the deputy governor of the People’s Bank of China, at a forum in Beijing on Saturday.

Asian markets retreated on Monday. The Nikkei 225 dropped 1.1 per cent in Japan, while the benchmarks in Australia and South Korea retreated 0.2 to 0.3 per cent.