Hong Kong stocks log best start to a year since 1999 as Alibaba, Tencent, Longfor fuel gains

China’s central bank issued another directive to help restore confidence among homebuyers, fanning gains in mainland developers
The Hang Seng Index reached a six-month high following a 6.1 per cent winning run this week

Hong Kong stock market

Jiaxing Li

Published: 10:36am, 6 Jan, 2023

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Hong Kong stocks completed the best start to a year in more than two decades as investors embraced risk in China reopening playbook. Mainland Chinese developers surged after China announced more supportive measures to bail out the industry.

The Hang Seng Index rose 6.1 per cent for the week to 20,991.64 at the close of Friday trading, lifting the benchmark index to a six-month high. The Tech Index jumped 7.3 per cent from a week ago, while the Shanghai Composite Index added 2.9 per cent.

Alibaba surged 17.2 per cent during the week to HK$101.60 while Tencent jumped 10 per cent to HK$$349.40, while Baidu jumped 14 per cent to HK$127.30 as China signaled an end the regulatory crackdown on internet companies. Policy support also drove gains in developers Country Garden and Longfor, which both soared 13 per cent to HK$3.03 and HK$27.50, respectively.

The Hang Seng’s winning run of 6.1 per cent this week is the strongest start to a year since the benchmark rose 6.7 per cent in the first week of 1999, according to Bloomberg data.

The People’s Bank of China will allow local governments to lower mortgage rates for first-time house buyers if new home prices drop for three consecutive months, it said in a statement on Thursday. The directive added to a slew of policy accommodation since Beijing unveiled a 16-point plan in November to restore confidence in the local housing market.

Hong Kong and China equities to rebound as economic recovery drives earnings

“You can see they have at least changed their gesture, showed determination to support developers and softened their attitude on internet companies,” said Redmond Wong, a market strategist in Hong Kong at Saxo Bank. “But there are still a lot of structural risks such as economic slowdown” to deal with in the short term, he added.

02:11

Up to 60,000 travellers allowed each way between Hong Kong and mainland China daily from January 8

The Hang Seng Index has risen almost 12 per cent since December 7, when China substantially abandoned its stringent Covid-19 control measures and began moves to reopen its borders. That helped restore more than US$350 billion of market value in the Hong Kong market.

“[China’s] economy, confidence, and activities will hopefully enter a stage of steady recovery” from the second quarter, and the equity market will enjoy a cyclical upturn, Bank of America’s China strategists including Winnie Wu said in a research note on Friday. Reopening is the key driver while the downside in the property market will be protected, they added.

Elsewhere, Sichuan Biokin Pharmaceutical debuted in Shanghai on Friday and surged 34 per cent to 37.65 yuan.

Markets in the Asia-Pacific region traded higher, with benchmarks in Japan, South Korea and Australia rising by 0.6 per cent to 1.1 per cent.

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