Hong Kong stocks rise to 7-month high on last trading day of the Year of Tiger as China growth bets gain traction

China’s recovery may have already started in December and the magnitude is likely to be stronger than expected, according to a Morgan Stanley report
High-frequency data such as intracity mobility and subway passenger volumes point to a recovery from the Covid fallout in China

Hong Kong stock market

Zhang Shidongin Shanghai

Published: 10:25am, 20 Jan 2023

Why you can trust SCMP

Hong Kong stocks rose to a near seven-month high on the final trading day of the Year of Tiger on renewed optimism that China’s growth will accelerate after the pivot to reopening of the economy.

The Hang Seng Index gained 1.8 per cent to 22,044.65 at the close, the highest level since June 28. It was also the first time that the benchmark finished above the 22,000 threshold since that day. The Hang Seng Tech Index surged 2.7 per cent and the Shanghai Composite Index added 0.8 per cent.

Alibaba Group Holding advanced 3.7 per cent to HK$116.30 and Tencent Holdings rallied 2.4 per cent to HK$391.80. Baidu climbed 4.9 per cent to HK$131.20. CNOOC gained 5.4 per cent to HK$11.38 and PetroChina added 3.6 per cent to HK$4.02 after the two Chinese oil producers projected higher profits for last year.

Optimism has been growing that China’s Covid-19 infections have already peaked after its abrupt lifting of all pandemic restrictions last month. High-frequency data such as intracity mobility and subway passenger volumes point to a recovery from the Covid fallout.

China will boost its appeal for foreign investors and continue to aid the private sector, quashing concerns that the world’s second-largest economy will revert to a planned economy, Vice-Premier Liu He said in an interview with Phoenix TV in Zurich.

Morgan Stanley said in a report on Thursday that China’s recovery may have already started in December and the magnitude is likely to be stronger than expected. The US investment bank expects China’s growth to accelerate to 5.7 per cent this year from 3 per cent in 2022.

Credit Suisse cautiously optimistic as China investors back reopening

The Hang Seng Index has risen 50 per cent from a 13-year low seen on October 31, as China dropped its rigid zero-Covid policy and signalled an end to the crackdown on big tech platforms. Still, the benchmark dropped 7.4 per cent in the Year of Tiger, which started on February 1.

“Stocks may see some back and forth in the first quarter after the significant rebound in the fourth quarter,” said HSBC Jintrust Fund Management in its 2023 strategy report. “But we’ll start to see a very secure path to the economic recovery and the end of the US interest-rate increases in the second quarter. That’ll speed up the pace of lifting earnings forecasts and boosting valuations.”

Meanwhile, Huaibei GreenGold Industry Investment tumbled 45 per cent to HK$1.06 on the first day of trading in Hong Kong.

Other major Asian markets all rose as traders digested a set of mixed US economic data, which showed a robust labour market and weakening home construction. Japan’s Nikkei 225 Australia’s S&P/ASX 200 both climbed 0.6 per cent, while South Korea’s Kospi rose 0.2 per cent.