China, Hong Kong stocks rally as gauge shows outlook for China’s small factories rose to highest level in three years
- Hang Seng closes above 27,000 for first time since mid-September
- Caixin/Markit PMI survey improved for fourth-straight month to 51.7 in October
China and Hong Kong stocks rallied Friday, as investor sentiment got a boost from a gauge showing the outlook for China’s small factories rose to its highest level in nearly three years.
The Shenzhen Component Index increased 1.73 per cent, while the Shanghai Composite Index rose 1 per cent, snapping a three-day losing streak.
Meanwhile, the Hang Seng Index rose 0.7 per cent to 27,100.76, closing above 27,000 for the first time since mid-September.
The Caixin/Markit manufacturing purchasing managers’ index (PMI) improved for a fourth straight month to 51.7 in October. That was its best reading since it hit the same level in February 2017, and from 51.4 in September. That beat expectations.
On Thursday, China’s official manufacturing PMI was 49.3 in October. That was down from 49.8 in September and below expectations. The October figure was the lowest since 49.2 posted in February.
The Caixin PMI mainly tracks 500 smaller private factories, while the official index focuses on 3,000 larger manufacturers.
“The Chinese government has implemented a lot of measures to help those [small and medium] companies. We see this Caixin PMI outperformed the one reported for the large state companies,” said Louis M.K. Tse, managing director of VC Asset Management.
China stocks also got a boost on investor confidence home appliance makers’ earnings will improve amid government incentives.
Gree Electric Appliances, China’s largest air-conditioner maker, jumped 8.65 per cent to 63.78 yuan, while Midea Group shot up 6.1 per cent to 58.89 yuan.
Brokerage stocks were among top gainers in the mainland after showing stellar earnings growth so far this year.
Shanghai Chinafortune jumped 5.9 per cent to 14.77 yuan, while First Capital Securities climbed nearly 5 per cent to 7.00 yuan
In Hong Kong, Sunny Optical posted its third straight day of gains, rising 2 per cent to HK$129.40, making it the top percentage gainer on the Hang Seng of the day. Zhongtai International reinstated coverage of the lens maker with a buy rating and price target of HK$146.90.
The three heavyweights on the Hang Seng – insurance and finance services provider AIA Group, HSBC and Chinese social and gaming giant Tencent – closed ahead.
AIA rose 1.3 per cent to HK$79.50, HSBC rose 0.2 per cent to HK$59.60, and Tencent inched up 0.2 per cent to HK$321.60.
Other Hong Kong stocks did well, too.
BeiGene shot up 31.9 per cent to HK$110. American biotech major Amgen agreed to buy BeiGene shares equivalent to a 20.5 per cent stake for US$2.7 billion, BeiGene said in an exchange filing. BeiGene is a Hong Kong and Nasdaq-listed cancer drugs developer.
Chinese mobile game giant CMGE, which started trading on the main board of Hong Kong’s stock exchange Thursday, picked up the pace Friday. On Thursday, it gained 2.1 per cent. But Friday, it jumped 20.5 per cent to HK$3.48.
Soho China, one of China’s largest commercial property companies, shot up 10.8 per cent to HK$2.97, following media reports earlier in the week that it plans to sell most of its commercial property in China for as much as US$8 billion. It has not clarified its plans.
ESR Cayman, the largest logistics real-estate platform in the Asia-Pacific region, netted 5.4 per cent in gains to rise to HK$17.70 on its first day of trading.
Additional reporting by Snow Xia, Karen Yeung, Eric Ng and Daniel Ren
