South China Morning Post
Advertisement
Advertisement
Stocks
Get more with myNEWS
A personalised news feed of stories that matter to you
Learn more
A man walking past a panel displaying the Hang Seng Index performance. The benchmark has risen by more than 20 per cent from its March 23 low, pushing Hong Kong stocks into bull-market territory. Photo: AFP
BusinessCompanies

Hong Kong stock bulls keep market rally alive on IPO allure amid resurgence in Covid-19 cases, sanction threats

  • Hong Kong may be battling a third wave of coronavirus outbreak with 19 new locally transmitted cases on Wednesday
  • Trump advisers said to be mulling steps to weaken Hong Kong dollar peg, according to a news report
Stocks
Martin Choi
Martin Choi
Why you can trust SCMP
Hong Kong stocks advanced on expectations an influx of hot money into stock offerings will support prices, overshadowing concerns over new coronavirus infections in the city and further fallout from the national security law.

The Hang Seng Index rose 0.6 per cent to 26,129.18. The benchmark slipped 1.4 per cent on Tuesday, the most in three weeks, after powering into a bull market on Monday from its March 23’s low. Markets in Australia, Japan and South Korea weakened.

New economy stocks led gains in Hong Kong. Tencent rose 5.2 per cent to HK$543.50, while Meituan Dianping advanced 8 per cent to HK$199.80.

It is “very likely” that hot money flowing into IPOs could keep fuelling the rally in Hong Kong, said Castor Pang Wai-sun, head of research at Hong Kong-based brokerage Core Pacific-Yamaichi. While the benchmark index may consolidate recent gains, it could re-test January’s peak of 29,100 in the coming months, he said.

“The bull market this time was due to fund inflows from both southbound and foreign investors,” Pang said. “The huge amount of funds from stimulus relief measures have helped global markets surge” and shake off the impact of Covid-19 pandemic, he added.

China Feihe rose 7.2 per cent to HK$16.96 after the producer of mainland’s bestselling infant milk formula batted away a report by US activist short seller Blue Orca accusing it of overstating its revenue and profits. Sales probably rose 40 per cent in the first half, it said in a filing today. The stock earlier fell by as much as 8.5 per cent.

Hong Kong hosted 64 new stock listings in the first half this year, allowing mostly mainland companies to raise HK$87.5 billion (US$11.3 billion) in capital from investors, according to a report published by accounting firm PwC. That’s an about 22.3 per cent increase in sum over the same period in 2019, according to data provider Refinitiv.

The Shanghai Composite Index advanced 1.7 per cent for its seventh straight session of gains as stock debutantes surged. The gauge has risen 11.6 per cent this year to a two-year high amid optimism China will be first among major economies to rebound from the pandemic.

Three other IPOs – Qingdao Kutesmart Company, Nanjing Develop Advanced Manufacturing and Geovis Technology Company – debuted on mainland bourses, surging by 44 to 438 per cent on their first day of trading.

“While investors can expect a market correction, there remain reasons to be positive on the A-share market’s longer-term outlook,” said Nicholas Yeo, head of China equities at Aberdeen Standard Investments, which managed £486.5 billion (HK$4.7 trillion) worldwide at the end of 2019.

“As China transitions away from reliance on exports, its growth will be driven by domestic consumption and a rising middle class. That will create opportunities to invest in quality companies in consumer discretionary and consumer staples, health care and financial services.”

Hong Kong’s battered Hang Seng Index expected to pick up steam in second half of year

A steady pipeline of new stock offerings of predominantly technology and biotech companies in Hong Kong has fanned a liquidity-fuelled rally in local stocks. The monetary authority has spent almost HK$73 billion in 24 interventions this year to weaken the local dollar from the stronger end of its trading band.

The Hong Kong dollar is back in the spotlight after Bloomberg News reported that some top advisers to President Donald Trump were mulling steps to undermine the city’s 37-year currency peg to the US dollar to punish China for implementing the controversial security law in the former British colony.

Today’s advance in Hong Kong appears to be laboured, however, as 21 of the Hang Seng Index constituent stocks rose while 26 members retreated, with markets wary of heightened diplomatic rows over the city’s controversial security law.
Hong Kong’s government may be fighting a third wave of coronavirus outbreak after confirming 19 of 24 new Covid-19 cases as local origins on Wednesday, in addition to 9 of 14 cases on Tuesday.

That may prompt authorities to tighten social distancing rules and hurt an economy already in its deepest recession on record.

A resurgence of Covid-19 cases has forced the Victoria state government in Australia to impose a six-week lockdown from Tuesday in the city of Melbourne. The World Health Organisation also acknowledged the possibility of airborne spread of the disease, and was updating its guidance on preventive measures.

Australia’s S&P/ASX 200 Index fell 1.54 per cent. Elsewhere in Asia, Japan’s Nikkei 225 slipped 0.8 per cent, while South Korea’s Kospi slid 0.2 per cent.

Post