Hong Kong stocks hit 5-month highs as fund positioning shows investors returning to China

HSBC said global funds raised their allocation to China, while cutting the underweight position on the Chinese market and reduced exposures to Taiwan and India
Mainland investors are also flocking to Hong Kong’s stock markets as data showed they are net buyers for the 19th straight day on Thursday via stock connect

Hong Kong stock market

Zhang Shidongin Shanghai

Published: 10:53am, 25 Apr 2024

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Hong Kong stocks extended gains on optimism that the appetite for Chinese assets was returning after Beijing pledged support to markets and signs of an earnings recovery emerged, with investors looking past potential US-China tensions even as President Joe Biden signed into law a bill that will force a divestment in video-sharing platform TikTok.

The Hang Seng Index rose 0.5 per cent to a five-month high of 17,284.54 at close. The Hang Seng Tech Index slipped 0.5 per cent, while the Shanghai Composite Index added 0.3 per cent.

The gain in Hong Kong stocks bucked the regional trend, as other markets reacted to the sell-off in US stocks overnight on the back of the disappointing outlook projected by Facebook parent Meta Platforms. Japan’s Nikkei 225 slid 2.2 per cent and South Korea’s Kospi retreated 1.8 per cent, while Taiwan’s Taiex dropped 1.4 per cent.

“Hong Kong’s market is a pretty safe bet, as the economy, corporate earnings and liquidity may have already troughed ,” said Cliff Zhao, a strategist at CCB International in Hong Kong. “Some overseas funds seeking trading opportunities have also returned to Chinese and Hong Kong stocks and that will further boost sentiment.”

Flags of CK Hutchison Holdings are seen outside Cheung Kong Center in Central. Photo: Nora Tam

The Hang Seng Index has erased all its year-to-date losses after China’s securities regulator vowed more liquidity-boosting measures by adding more exchange-traded funds to the Stock Connect investment scheme and facilitating listings of high quality domestic companies. Upbeat earnings from Ping An Insurance and HKEX this week has further fuelled buying interest.

Property developer China Overseas Land and Investment jumped 6.3 per cent to HK$12.90 after posting a surprise 22 per cent increase in operating profit in the first quarter. Hong Kong Exchanges and Clearing added 3.3 per cent to HK$246.80, rising for a second day after profit for the first three months exceeded estimates.

Global investors have increased their allocation to China, dialling back their bearish bets on the market, while cutting exposures to Taiwan and India, according to HSBC Holdings.

“GEM [global emerging markets] funds have rolled back on their underweight on mainland China and turned neutral, while Asia’s funds exposure on the market is now at a seven-month high,” Herald van der Linde, a strategist at the bank, said in a research note on Thursday.

Mainland investors have also been piling to Hong Kong in droves, snapping up almost HK$2 billion (US$255 million) worth of stocks through the stock connect programme on Thursday as they remained net buyers for 19 days in a row.

Billionaire Li Ka-shing’s three listed units all gained after forming a consortium to acquire the largest natural gas network operator in Northern Ireland. CK Asset Holdings added 1.6 per cent to HK$32.75 and CK Infrastructure Holdings gained 0.7 per cent to HK$44.65, while Power Assets Holdings climbed 1.7 per cent to HK$45.65.

Elsewhere, Great Wall Motor surged 5.4 per cent to HK$11.82 after the company said its first-quarter profit surged from a year ago and following its pledge to return more to shareholders and improve disclosures. The stock is not a member of the Hang Seng Index.