Hang Seng Index gains as investors pile into battered old economy stocks
- Banking, real estate, airline giants advance, while new tech board falls
- High-flying Next Digital falls back to earth, finishing down 41 per cent
Hong Kong stocks posted their second straight day of gains as investors piled into battered traditional sectors like banking, real estate and airlines, sending the benchmark to its highest level in a week.
The Hang Seng Index rose 1.4 per cent to 25,244.02 on Wednesday, marking its first close above 25,000 since last Thursday. Only nine stocks on the 50-member index finished with losses.
Sentiment was shaky in the morning, when the benchmark fell 0.8 per cent, partly on concerns China is tightening the liquidity taps as the economy continues to show signs of recovery after the worst of the coronavirus. But it turned up, as traders focused on continued headlines about progress toward finding a vaccine against the coronavirus and decided to profit take from new economy high fliers and go into beaten-down sectors.
The top five winners were a Who’s Who of Hong Kong’s old economy stocks, which have been pommelled by the coronavirus following anti-government protests last year and the US-China trade war.
HSBC rose 4.8 per cent, Hang Seng Bank advanced 5.2 per cent, while CK Asset Holdings climbed 3.5 per cent.
Meanwhile, China Eastern Airlines advanced 2.7 per cent in its second day of gains, while China Southern Airlines ran up 3.7 per cent, also registering a back-to-back advance. Domestic air travel has stabilised on the mainland, and China Eastern has launched weekend and weekday package deals that were the latest enticement to get people to travel again.
“Money flowed into old economy stocks today, including banking and aviation,” said Kenny Wen, wealth management strategist at Everbright Sun Hung Kai. “I think partly [it was] due to the latest development on a virus vaccine.”
Russia, China and the US say they are closing in on a vaccine solution to the virus, which has killed 740,000 people around the globe. Russia said it has a vaccine and will begin mass vaccinations in October.
Investors were fixated on Next Digital, which shot up as much as 59 per cent before tumbling to close down 41 per cent. Its founder was arrested on Monday and accused of violating the city’s new national security law, sparking a rallying cry to buy his stock to show support, which has been cited as the reason its share price rocketed by 1,200 per cent over two days. The city’s security watchdog had announced it would “monitor” the stock and said investors were “strongly encouraged to exercise extreme caution”.
Meanwhile, new economy stocks had a rocky day.
The Hang Seng Tech Index fell as much as 4.2 per cent in the morning, but narrowed the loss to 1.7 per cent by the end of the day. Tencent advanced 1.4 per cent ahead of its after-market-hours second quarter results.
“We are seeing continued signs China is tightening liquidity as the economy improves,” said Alan Li, portfolio manager at Atta Capital. “That pressured tech stocks, which have been soaring.”
The Shanghai Composite closed with a 0.6 per cent loss.
July’s money and credit data came in below expectations, as the country continues to show signs it is digging out of the coronavirus hit to the economy.
Beijing is “still supportive but clearly less dovish than it was before June,” the Goldman Sachs Asia team wrote in a new note. “Given the strength in recent activity growth (despite the flooding in southern China), rising CPI and PPI inflation, improving unemployment conditions and the successful control of the spread of virus (the second wave outbreak has effectively ended with the exception of Xinjiang, which is geographically isolated and economically less significant), policymakers are likely feeling less pressure to support the economy.”
Among stocks debuting in the mainland, chip maker Henan Shijia Photons Technology shot up 288 per cent. The CSI 300 of large caps traded in Shanghai and Shenzhen slipped 0.7 per cent. The tech-heavy ChiNext index declined 2 per cent, but remains up 47 per cent for 2020.
