Hang Seng Index

China, Hong Kong stocks buck regional sell-off as policy support gathers pace

  • Both benchmarks in the mainland and Hong Kong reversed earlier losses to close higher, shrugging off an overnight rout in US stocks
  • China’s stocks are showing signs of decoupling from US counterparts
PUBLISHED : Wednesday, 21 November, 2018, 9:56am
UPDATED : Wednesday, 21 November, 2018, 5:31pm

Stock markets in mainland China and Hong Kong reversed earlier losses to close higher on Wednesday, shrugging off an overnight rout in US shares.

They bucked declines elsewhere in Asia that took their cues from a sell-off in the US, as traders re-assessed the strength of the world’s second-largest economy after a raft of measures to bolster growth.

The Shanghai Composite Index gained 0.2 per cent and Hong Kong’s Hang Seng Index added 0.5 per cent, as both benchmark gauges reversed intraday losses of at least 1 per cent.

Other major regional benchmarks all ended lower, with Japan’s Topix falling 0.6 per cent and Australia’s S&P/ASX 200 dropping 0.5 per cent, after US technology stocks tumbled into bear market territory overnight.

Chinese developers from Hong Kong-traded Country Garden Holdings and Shanghai-listed China Fortune Land Development surged on speculation measures to cool the housing market will be eased amid falling sales.

Unfazed by the recent rout in the US market, investors in the mainland and Hong Kong started buying more stocks after President Xi Jinping said support for China’s private companies was “unwavering” and financial regulators vowed to widen funding channels for smaller firms to defuse the risk linked to shares pledged as collateral for loans. The Shanghai Composite has risen 4 per cent over the past month, the second-best performer among the world’s major markets after Brasil.

“The expectations about China’s economic fundamentals have been improving after all these support measures and stock valuations are also pretty attractive,” said Chen Hao, a strategist at KGI Securities in Shanghai. “Hong Kong’s market is benefiting for the same reason and that’s why it’s moving in synchrony with the mainland’s market.”

Chinese equities have been decoupling from US stocks since mid-October. The 30-day correlation between the Shanghai Composite and the Standard and Poor’s 500 Index was at 0.22, near the lowest level in almost three months, according to Bloomberg data.

The Shanghai Composite added 5.66 points to 2,651.51 on Wednesday, paring its loss in 2018 to 20 per cent. The Hang Seng Index rose 131.13 points to 25,971.47, erasing an intraday decline of as much as 1.3 per cent. The Hang Seng China Enterprises Index gained 0.2 per cent.

Property developers in the two markets led the pack of gainers. Country Garden jumped 4.9 per cent to HK$9.68 in Hong Kong and Sino Land climbed 1.6 per cent to HK$12.88. China Fortune Land jumped 6.4 per cent to 26.40 yuan in Shanghai, and Shanghai SMI Holding advanced 5.4 per cent to 7.41 yuan.

Shenwan Hongyuan Group, a Shanghai-based brokerage, expects policies aimed at curbing the property market to be softened next year, particularly in the second-tier cities, because of deteriorating fundamentals. Home sales in terms of floor area dropped 3.1 per cent in October, a second consecutive month of declines, according to the statistics bureau.

Zhejiang Sunriver Culture added 1.3 per cent to 4.76 yuan in Shanghai. Billionaire actress Zhao Wei and her husband have been banned from taking on senior positions in any listed companies for five years for misleading investors in their previous bid for a controlling stake in the studio, the Shanghai Stock Exchange said in a statement on Tuesday night.

Some suppliers of technology giant Apple fell in Hong Kong. FIT Hon Teng shed 1.4 per cent to HK$3.44 and Tongda Group Holdings fell 2.2 per cent to 98 Hong Kong cents.

“The tech stock bull run in the US has ended and this will hit their suppliers in Asia, such as the many component manufacturers for the iPhone,” said Louis Tse Ming-kwong, managing director of VC Wealth Management.

Wall Street defines a bear market as occurring when a stock declines 20 per cent from its peak.

Apple tumbled 4.8 per cent to close at US$176.98, the lowest close in 10 months, after Goldman Sachs cut its price target by 13 per cent.